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How comprehensive is your coverage? Why a limitation in your professional liability policy for negligence only is a very bad idea.

24443863480_337a4f450e_b[1]by Rickard Jorgensen, FCII, ACIArb., ARM

Recently one of our competitors relaunched and rebranded its accountants’ professional liability program. The new program was promoted as broader coverage and an enhancement upon the previously terminated program.  There were various “bells and whistles” added to the program but one important feature was conspicuously overlooked and omitted from marketing materials.

The previous policy contains a definition of a protected aka covered aka wrongful act as follows:

Protected Act means any actual or alleged act, error, or omission committed in the 
rendering of or failure to render Professional Services by you.

When the rebranded program was launched a new definition was employed:

Wrongful act means any actual or alleged negligent act, error, omission, or misstatement committed in your rendering of or failure to render professional services

N.B. my italics and underline

The key word in the forgoing is “negligent.”  Whereas the previous policy provided full tort coverage, the rebranded program restricts claims to negligence claims only.

This limitation is not unique.  Several leading insurers offer this restrictive form of coverage.

However, the leading professional liability program for CPAs does not contain this limitation but merely relies upon the undefined statement: “act or omission, including personal injury or advertising injury, in the rendering of professional services.

But what does this mean?  In plain terms if your policy contains the word negligence in the definition captioned above, then a range of other legal wrongful acts (i.e. other torts), alleged fraud, intentional acts and breach of contract are NOT covered.

This is important because we have seen many cases where CPA firms have been sued and the papers filed often contain allegations of these wrongful acts.

By way of contrast, since 1999 CPAGold™ has consistently offered comprehensive protection for covered acts by way of the following definition in the policy:

Covered Act means any actual or alleged act, error, omission or Personal Injury committed in the rendering of or failure to render Professional Services.

Review your current policy before this becomes an issue and you are left with no, or partial, coverage for a claim.  DON’T ACCEPT negligence only coverage.

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Jorgensen & Company are not attorneys and do not offer any form of legal advice. Consult with appropriately qualified local counsel for more assistance. Rickard Jorgensen is President and Chief Underwriting Officer for the CPAGold™ program and may be contacted at (201) 345 2440 or rjorgensen@jorgensenandcompany.com

 

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