Know the differences between coverages
Selling professional liability insurance to niche markets is a fairly new practice, and it’s a great way to increase your agency’s clients. To be successful in the professional liability market, however, it is critical that you fully understand how this coverage differs from general liability, and that you grasp how it impacts the specific business of your targeted audience.
General liability protects an insured from financial harm resulting from negligence that causes bodily injury or property damage while professional liability protects the insured from financial harm when their error or omission results in financial loss to the claimant. Most general liability policies exclude professional liability just as most professional liability policies exclude general liability, so it is important to understand their differences thoroughly.
In the 1990’s, I was working for an underwriting company that was given the opportunity to develop professional liability coverage for temporary staffing agencies. The temporary employees these agencies worked with provided services that exposed their employers to losses that were not just the result of bodily injury or property damage. Here are two examples of those instances:
1 – EMPLOYER OVERSIGHT
The owner of a company fails to conduct adequate background checks on a programmer who was sent to work with a bank, and that programmer goes on to hack into the bank’s system and steal $1 million. This is a professional liability exposure that a general liability policy wouldn’t cover.
2 – EMPLOYEE ERROR
A client asks an HVAC contractor to add a heating and cooling system to a new computer facility, requesting that they both design and install the proper equipment. The design is later found to be flawed, causing $250,000 of computer equipment to overheat and fail. Because system design is a professional act, the HVAC contractor would need professional liability insurance in this case.
As an insurance agent, selling professional liability coverage will require that you are able to drive home the importance of this protection in the client’s mind. To do this, you must understand the coverage and their business well so that you can identify possible exposures.
Almost every business needs professional liability insurance. With some research and imagination, you can develop scenarios like those outlined above, detailing situations where your clients might be held responsible for financial loss resulting from a wrongful act, error or omission that general liability coverage would not protect. By clearly illustrating these instances with relevant, carefully thought-through stories, you’ll be able to gain business and boost your bottom line.
*This article was repurposed from Independent Agent.
Art Seifert, Glatfelter Program Managers
Arthur is a fitness enthusiast, a grandfather, philosopher and possessor of a wretched wit.
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