Chubb has taken over the miscellaneous professional liability policy that had been offered by Executive Risk Indemnity Inc. The policy is a claims made liability policy that provides coverage for such operations as business brokers, claims adjusters, credit bureaus, executive recruiters, landscape architects, printers, sports agents, travel agents, and tax preparers (not a complete listing – please contact company). Covered defense costs are included in the applicable limit of liability. There are many new definitions in the Chubb form.

CONTACT

Chubb Group of Insurance Companies

15 Mountain View Road

Warren, NJ 07059

(908) 903-2000

UNDERWRITING GUIDELINES

A completed application is required, along with copies of any informational brochures or other promotional literature, current financials, and a copy of the applicant's standard contract for services provided. If the organization is less than two years old resumes of all the principals are required.

AVAILABILITY OF COVERAGE

All states.

LIABILITY

LIMITS AND DEDUCTIBLES AVAILABLE

Maximum limits of $2 million are available. Limits may be on a per claim basis, with an annual aggregate applying. Deductibles begin at $2,500.

WHO IS INSURED

The policy covers the person or entity stated in the declarations and any person for whose wrongful acts the insured is legally responsible.

WHAT IS INSURED

The policy covers the person or entity stated in the declarations for the commission of a “wrongful act.” A wrongful act covers a broad range of acts that could be committed by an insured person or organization and includes failure to perform professional services, actual or alleged acts, errors or omissions committed, attempted, allegedly committed or attempted. This definition is greatly broadened from the prior policy. Defense expenses as a result of any claim made during the policy period are included within the limit of liability as long as the act was first committed on or after the retroactive date in the declarations.

PERILS

The only peril covered is the commission of a “wrongful act.”

I. INSURING AGREEMENT

The policy contains one insuring agreement. The agreement is to pay on behalf of the insured damages which the insured becomes legally obligated to pay as a result of a claim. Defense costs are now considered part of the loss and do not constitute a separate insuring agreement.

II. DEFINITIONS

The definitions section has been greatly revised. Several new terms are defined, and some have been removed. Newly defined terms that will be discussed are employee, executive, insured person, loss, pollutants, pollution, professional services claim, and securities laws. Terms that no longer appear in the definitions section are damages, policy period, and related claims.

A.Claim means Professional Services Claim. A Professional Services Claim is defined as any written demand for monetary damages or non-monetary relief or a civil proceeding begun by the service of a complaint or similar pleading against an insured for a wrongful act, including any appeal. Also included in the definition of Professional Services Claim is a written request by an insured to toll or waive a statute of limitations relating to a potential Professional Services Claim described earlier. This is significantly different from the prior definition of claim. Before the demand did not need to be written and non-monetary damages were not included. Now a client can claim emotional or pain and suffering damages as a result of the professional's wrongful act. This can significantly increase the potential amount of loss. Also not included was a written request to toll or waive a statute of limitations relating to a professional services claim.

B.Defense Costs means that part of loss consisting of reasonable costs, charges, fees (including but not limited to attorneys' and experts' fees) and expenses (other than regular/overtime wages, salaries/fees of the directors, officers or employees of the insured organization) incurred in defending any claim. Also included in the defense costs is the premium for appeal, attachment or similar bonds.

C. Employee is a newly defined term. Employee is defined as any natural person whose labor or service is engaged by and directed by the insured organization. This includes part-time, seasonal, leased, and temporary employees as well as volunteers. Employee does not include any independent contractor. The inclusion of volunteers is an expansion of coverage. In the prior policy insureds were only directors, officers, employees or partners, volunteers were not included. So if the insured is an organization that allows volunteers to answer the phones or help with collection of materials, say the local food bank, there is coverage for wrongful acts committed by the volunteers.

D.Executive means any natural person specified below:

·duly elected or appointed directors, officers, members of the board of managers or management committee members of any insured organization incorporated in the United States of America;

·in-house general counsel of any insured organization incorporated in the United States of America;

·equivalent positions of (1) or (2) above in any insured organization chartered in any other jurisdiction anywhere in the world. This is another newly defined term and provides specific detail differentiating an executive from an employee.

Executive is defined separately from employee and includes senior management positions such as directors, officers, board members worldwide. This is important because it expands the territory to worldwide coverage- a wrongful act committed by a board member in London is now covered, whereas in the prior policy the territory was limited to the United States, its territories and Canada . While this form does not declare a territory, the inclusion of executives worldwide expands the territory.

E.Insured means the insured organization and any insured person.

F.Insured Person means any past, present, or future executive or employee of the insured organization.

G.Loss means the total amount which any insured becomes legally obligated to pay as a result of any claim made against any insured for wrongful acts. Wrongful acts include but are not limited to, damages (including punitive or exemplary damages, which are insurable under the law of any jurisdiction which has a substantial relationship to the insureds, the company, this policy or the claim and which is most favorable to the insurability of such damages), judgments, settlements, pre-judgment and post-judgment interest and defense costs. Note that punitive or exemplary damages must be insurable under the law in order to be considered part of the loss; punitive or exemplary losses that are not insurable according to relevant laws are not included in the definition of loss. Loss does not include:

(1)any amount for which an insured organization or an insured person is absolved from payment by reason of any covenant, agreement (other than indemnification of an insured person by the insured organization) or court order;

(2)matters uninsurable under the law pursuant to which this policy is construed;

(3)taxes, fines or penalties imposed by law, or the multiple portion of any multiplied damage award; or

(4)any amount allocated to uncovered loss pursuant to Section X Allocation of the General Terms and Conditions Section.

Policy period is no longer a defined term.

H.Pollutants has an all-encompassing definition and are defined as follows: “means any substance located anywhere in the world exhibiting any hazardous characteristics as defined by, or identified on a list of hazardous substances issued by, the United States Environmental Protection Agency or any state, county, municipality or locality counterpart thereof. Such substances shall include, without limitation, solids, liquids, gaseous or thermal irritants, contaminants or smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste materials. Pollutants shall also mean any other air emission, odor, waste water, oil, or oil products, infectious or medical waste, asbestos or asbestos products and any noise.” It's interesting to note that noise is included as a pollutant. So if the insured is using noisy equipment of some sort and it disturbs local residents, that noise is pollution. Note that any noise, not noise over a certain amount of decibels is considered a pollutant. The sound does not have to be particularly loud, just sound.

I.Pollution means the actual, alleged, or threatened discharge, release, escape, or disposal of pollutants into or on real or personal property, water or the atmosphere. The direction or request that the insured test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize pollutants, or any voluntary decision to do so is also considered pollution. Pollution is the result of pollutants escaping or making contact with any sort of property or uncontaminated substance.

J.Professional Services means only services which are performed for others for a fee and which are listed in Item 6 of the Declarations of this coverage section.

K.Professional Services Claim means:

(1)any of the following:

(a) a written demand for monetary damages or non-monetary relief; or

(b) a civil proceeding commenced by the service of a complaint or a similar pleading; against an insured for a wrongful act, including any appeal; or

(2)a written request received by an insured to toll or waive a statute of limitations, relating to a potential Professional Services Claim as described in paragraph (1) above. This was not defined in the prior policy as such, but the same elements were contained in the definition of claim.

L.Securities Laws means the Securities Act of 1933, Securities Exchange Act of 1934, Investment Act of 1940, any state securities law (known as “blue sky” laws), or any other federal, state, or local securities law, or any amendments, rules or regulations promulgated thereunder, or any other provision of statutory or common law used to impose liability in connection with the offer to sell or purchase, or the sale or purchase of securities. Securities laws are now defined because violations of these laws are now excluded from the policy.

M.Wrongful Act means any actual or alleged act, error, or omission committed, attempted, or allegedly committed or attempted by an insured organization or by any insured person in his capacity as such, by or on behalf of the insured organization, solely in the performance of or failure to perform Professional Services. This definition is expanded to include attempted or alleged acts. So even if the insured attempts a wrongful act and is caught before the termination of the act, the attempt is still considered a wrongful act.

III. EXCLUSIONS

Since the policy applies to allegations of negligence in performance of a professional service, actions other than the commission of a “wrongful act” as defined are excluded from coverage. This policy contains several changes to the exclusions.

A.The policy does not apply to any claim against an insured:

(1)based upon, arising from, or in consequence of any circumstance, if written notice of such circumstance has been given under any prior policy of which this policy is a direct or indirect renewal or replacement and if such prior policy affords coverage (or would afford such coverage except for the exhaustion of its limits of liability) for such claim, in whole or in part, as a result of such notice;

This is a new exclusion and clarifies that a loss covered under a prior policy will not be covered under this one.

(2)based upon, arising from, or in consequence of a written demand, suit, or other proceeding pending, or order, decree or judgment entered for or against any insured on or prior to the pending or prior litigation date as set forth in Item 4 of the Declarations of this coverage section, or the same or any substantially similar fact, circumstance or situation underlying or alleged therein;

This is similar to exclusion (1) in that claims prior to a given date are excluded.

(3)based upon, arising from, or in consequence of Pollution, including but not limited to any claim for financial loss to any insured organization or its security holders or creditors or customers;

This exclusion has been changed greatly. Since pollutants and pollution are now defined in the policy, the exclusion does not go into detail describing what is pollution. No longer excluded is the requirement, order, request, regulation for the insured to test for, monitor, clean up, remove the pollution, or any action taken in anticipation thereof. So while the pollution itself is excluded, any required clean up and testing is covered. This is unusual in pollution exclusions.

(4)based upon, arising from, or in consequence of bodily injury, mental anguish, emotional distress, sickness, disease or death of any person or damage or destruction of any tangible property, including the loss of use of the property whether or not it is destroyed;

An interesting change in this exclusion is that loss of use is excluded even if the property is not damaged or destroyed.

(5)for an actual or alleged violation of the responsibilities, obligations or duties imposed by the Employee Retirement Income Security Act of 1974, or any amendments, rules or regulations promulgated thereunder, or any similar provisions of any federal, state, local statutory or common law anywhere in the world;

(6)based upon, arising from, or in consequence of the performance of or failure to perform Professional Services for:

(a)any insured;

(b)any entity which is owned or controlled by, under common ownership or control with any insured;

(c) any natural person or entity which owns or controls any entity included within the definition of insured; or

(d)any entity of which any insured is a director, officer, partner, or principal shareholder;

Minor wording changes are present in this exclusion. Now any insured, instead of the insured, is excluded from failure to perform professional acts.

(7)based upon, arising from, or in consequence of any actual or alleged violation of the Securities Laws;

This is a new exclusion and pertains to the newly defined securities laws. Any violation of securities law is excluded, there are no exceptions.

(8)for any actual or alleged liability of an insured under any written or oral contract/agreement, provided that this exclusion (A)(8) shall not apply to the extent that an insured would have been liable in the absence of the contract/agreement;

(9)based upon, arising from, or in consequence of any actual or alleged infringement of copyright, patent, service mark, trademark, trade name, or misappropriation of ideas or trade secrets;

The actions mentioned in this exclusion are basically corporate espionage and the resultant gathering and using of proprietary information. This is not contemplated in the coverage under this form. Even if an action has taken place accidentally and is not a deliberate attempt to interfere with a competitor, there is no coverage.

(10)based upon, arising from, or in consequence of any willful violation of any federal, state, or local law or statute regarding discrimination, if a final and non-appealable judgment or adjudication adverse to the insured establishes such a willful violation;

This exclusion has been separated from the exclusion for deliberate fraudulent acts. This is excluding acts that willfully violate federal or state laws or statutes. Of note is that the exclusion no longer states that criminal acts are excluded, but that willful acts that violate laws are excluded. This is a broader exclusion.

(11)brought or maintained by or on behalf of any insured;

(12)for disputes solely involving the insured's fees, charges, over charges or cost over-runs;

This is another new exclusion that was not in the prior policy. While incorrectly charging a client is an error and can be considered a wrongful act, the policy intent is to not cover such losses.

(13)based upon, arising from, or in consequence of any deliberately fraudulent act or omission, or any willful violation of any statute or regulation by such insured, if a final and non-appealable judgment or adjudication adverse to said insured establishes a deliberately fraudulent act, omission, or willful violation; or

(14)based upon, arising from, or in consequence of such insured having gained in fact any profit, remuneration, or financial advantage to which an insured was not legally entitled.

This is another new exclusion and is excluding acts of the insured that are often dishonest.

B.Other than defense costs, no coverage is available for costs of compliance with any order for, grant of, or agreement to provide non-monetary relief.

C.Severability of Exclusions

With respect to the Exclusions A. (13) and A. (14) :

(1)no fact pertaining to or knowledge possessed by any insured person shall be imputed to any other insured person to determine if coverage is available; and

(2)only facts pertaining to, and knowledge possessed by any past, present, or future Chief Financial Officer, President, Chief Executive Officer or Chairperson of any insured organization shall be imputed to any insured organization to determine if coverage is available.

IV. Other Insurance

The standard other insurance provision that states that this policy is excess over any other policy covering the loss regardless of whether that policy states it is primary, excess, contributory, contingent or otherwise applies.