Summary: Miscellaneous professional liability is sometimes called Errors and Omissions liability. It protects businesses and individuals against claims made for inadequate work or negligent actions in performing a professional service. Even the most meticulous companies or individuals who perform professional services for other people can make mistakes. Details can be overlooked, facts can be misstated, important tasks can be forgotten, and things can be misplaced. A company whose employee has made a mistake can be sued by clients over allegations of errors, omissions, misrepresentation, failure of timeliness, or failure to keep client information confidential. A multi-million dollar lawsuit could sink almost any company. Because we live in such a lawsuit-obsessed society, whenever someone makes a mistake, missteps, or somehow causes someone else harm the general response is “sue!”

In fact, a company doesn't have to do anything wrong and a suit may still be brought. Despite how meritless a lawsuit might be, it still must be defended. Some firms and professions require or strongly suggest that their professionals carry professional liability insurance in case a mistake is made. Some professions that carry such a high risk of incurring legal liability while on the job are attorneys, doctors, teachers, therapists, physical or occupational therapists, brokers, accountants, and contractors. ISO has developed a new Miscellaneous Professional Liability form MI 00 01 06 17 which is discussed in this article. ISO introduced this form in order to help insurers cover one of the most quickly growing sectors of the U.S. economy, professional services. According to statistics from the U.S. Department of Labor, the professional services industry rose by 542,000 in just the last year, accounting for about 23% of nonfarm job growth. The form provides coverage for the defense of professional disciplinary and licensing proceedings due to the increased regulatory activity and oversight that many professional services face today. The form joins several other professional liability coverage forms including forms made for lawyers, and real estate and insurance agents and brokers.

Topics covered:

Section I – Insuring Agreement

Section II – Limit of Liability

Section III – Defense and Settlement

Section IV – Retention

Section V – Related Claims

Section VI – Coverage Enhancements

Section VII – Coverage Extension

Section VIII – Exclusions

Section IX – Conditions

Section X – Extended Reporting Periods and Run-Off Coverage Period

Section XI – Definitions

Insuring Agreement

Section I- Insuring Agreement.

“We” will pay on “your” behalf all “loss” that “you” are legally obligated to pay in excess of the Retention shown in the Declarations for each covered “claim”:

A. First made against “you” during the “policy period” or applicable Extended Reporting or Run-Off Coverage Period;

B. Alleging a “wrongful act” that first occurred on or after the retroactive date but before the end of the “policy period”; and

C. Reported to “us” in accordance with the terms of this policy.

Analysis

The Miscellaneous Professional Liability Policy was designed to provide claims-made and reported coverage. The coverage is generally provided for damages and defense costs that result from a “wrongful act” in connection with the performance of or failure to perform professional services to which this insurance applies. The “wrongful act” must occur in the coverage area and on or after the retroactive date. A “wrongful act” is defined as any actual or alleged act, error, misstatement, misleading statement, omission, neglect, breach of duty committed, attempted or allegedly committed or attempted solely in the performance or failure to perform “professional services”. For example, a CPA provides incorrect information to a client which results in the client being heavily fined by the IRS; the CPA's dispensing of incorrect information is a “wrongful act”.

Limit of Liability