I admit that I am completely biased when it comes to professional liability, because that is the insurance forum within which I have worked for nearly 30 years. I am mystified that many companies still do not purchase the following types of professional liability insurance for exposures that are arguably universal to all companies except individual proprietorships. These coverages are critical for any company doing business in 2012:
- D&O liability insurance. This protects the directors and officers, and sometimes the company itself, against losses and related defense expenses arising from allegations of wrongful acts by the Ds and Os in their capacity. While the first thing that comes to mind are the huge securities class action suits faced by public corporations, even smaller public and non-profit companies are increasingly the subject of D&O claims. Employees and clients bring most claims against private companies and non-profits. Directors and officers of private and non-profit companies can be at even greater risk, because these liabilities are personal—their own assets are at stake—and these organizations may have small budgets and limited resources.
- Employment practices liability insurance (EPLI). EPLI protects companies against allegations that they have been negligent in their employment practices, such as hiring and firing, compensation and classification of employees, and layoffs and promotions, which are covered by federal, state and local laws. Any company with employees is potentially at risk, and smaller companies are definitely not immune: According to the EEOC, roughly 40 percent of all EPLI claims are brought against companies with only 15 to 100 employees. Even more disconcerting is the fact that retaliation has now become the most frequent charge made: More than 37 percent of the almost 100,000 charges in 2011 involved retaliation. This should strike fear in any company’s heart, because retaliation claims are easier to prove than the underlying action, the victims invoke sympathy and increasingly large awards are being made.
- Cyber (data security and privacy) liability insurance. A review of the types of activities that create cyber exposures will help you understand the breadth of the coverage you can provide. Cyber risks include violations of privacy policies and release of personal information, transmission of viruses, hacking, copyright or trademark infringement, or denial of services. It is difficult to imagine a company that does not conduct any of these risky activities: Internet connectivity, e-commerce, business websites and Internet advertising, credit card processing, etc. Any business you come in contact with engages in most, if not all, of these activities that create cyber exposures.