Miscellaneous E&O: As industries and professions mature, so do their E&O insurance needs

AAB: What is the term "miscellaneous E&O" generally understood to mean?

Goldstein: Typically, it's a catch-all for professions that don't have dedicated products; segments of the E&O marketplace that are a little tougher to identify, or to put in an ironclad category. For instance, a lawyer is a lawyer is a lawyer, and a CPA firm is a CPA firm. Something like a marketing consultant, or a technology consultant, might be a little more elusive.
AAB: Looking over your E&O brochure, I see about 50 professions listed. How have you arrived at those specialties? Or do you have a product for literally every profession out there?
Goldstein: We will consider many classes that extend beyond these 50 and the universe of potential classes expands almost daily with the growth in service industries and the increased specialization of many industries. We draw upon our claim experience, industry experience, the size of a particular class or niche and general risk factors to come up with areas where we feel we can grow profitably and serve a market need.
AAB: You've determined that there's a coverage need for dog groomers, to name one on your list. Should someone come to you interested in coverage for, let's say, parking lot stripers, you might develop that product? Goldstein: Yes, we do listen. We're still actively listening to ideas that people bring us.
AAB: If someone wanted coverage for a profession you're not currently insuring, can you adjust an existing policy, or would you have to start from scratch? Goldstein: We have an open category for miscellaneous consultants, so a lot of things can fit into there. We operate more on a basis of anything that's not prohibited is at least a possibility.
AAB: How long has Philadelphia been selling miscellaneous E&O?

Goldstein: About 14 years. It's certainly experienced an awful lot of growth during the time that we've been in it. Not just for us, but for the industry.
AAB: How has this market changed in the past five years or so?

Goldstein: Every profession is trying to sophisticate and refine itself, and the more formalized a profession becomes, the more inclined it is to both buy and to require of itself professional liability insurance. The more traditional post-graduate degrees, like lawyers and doctors, have had professional liability insurance for many years. But now, there are other professions emerging with exposures that were not contemplated or served by traditional professional liability or general liability forms.
This coincides with an overall increase in litigiousness in the world over the same period of time. For every legitimate profession, coverage is a legitimate need. We have mortgage brokers as one of our subclasses, and that is certainly an area under economic strain that wasn't predicted three years ago, for example.
AAB: With this growth, has this become one of Philadelphia's "premium" specialties, so to speak?

Goldstein: Yes, it's extremely significant for us as a company. We've doubled our revenue over the past five years, which accounts for about 5 percent of the company's business.
We have a balanced book of business including several major subclasses such as technology consultants, claims adjusters and management consultants. We've grown that by adding more classes and designing superior coverage to meet evolving needs.
AAB: How have you gone about marketing this specialty?
Goldstein: We have an extremely strong network of agents and brokers; as an open brokerage market we have the ability to work with agents having specific niches of business on a broad scale. We regularly update them on all the things we do, both in terms of professional liability and commercial packages. We also target affinity and trade association-based programs and agencies with significant books of business.
AAB: How would you describe the typical cost?

Goldstein: It tends to be an inexpensive coverage.
AAB: So there's no reason not to get it.

Goldstein: Professional liability is often the single most important form of coverage that these firms carry, so product breadth and the strength of the carrier are extremely important buying considerations. Lack of coverage could easily bankrupt many firms should a large claim occur.
AAB: Describe some of the typical coverages, please. Goldstein: We perceive our coverage as extremely broad. The core covenant of the policy is to indemnify loss arising out of an unintentional professional act or omission, and that's a particularly wide definition. A lot of things can develop from there, both foreseen and unforeseen. And the types of things that are excluded are pretty limited. We don't cover intentional acts, criminal mischief or insureds suing themselves to try and recover from us. We don't cover things that aren't designed for this type of insurance product–for example, we have no play in workers' comp.
We do offer a BOP product to go with our E&O, so we do have a GL and property coverage available that way. Due to potential gray areas between the professional liability and GL, there is a strong incentive to have these coverages with the same carrier. We also have crime coverage available, EPL, D&O and employer fiduciary. All those things can be cross-sold. We like to think we can handle our clients' insurance needs in a particularly economical, one-stop fashion.
AAB: Thus, one of your selling points is broad coverage. Goldstein: We like to think that our coverage is as broad as any available in the marketplace. Also, we have something called the Bell endorsement, which provides numerous unique coverages at no cost to the policyholder, such as first-party reimbursements for things like identify theft. It also has terrorist travel reimbursement, where we would pay for the increased costs of a hotel stay or a more expensive flight if someone were traveling on business and a terrorist event occurred. We also cover real estate consulting fees, and if the insured's premises are unforeseeably destroyed, we give them up to $5,000 to find a new place to conduct business. The endorsement also includes temporary meeting space coverage–for instance, if a climate control or hot water system breaks down and disrupts business and a client meeting, we'll pay up to $5,000 to relocate the meeting.
AAB: Are you seeing more consultant clients these days? Goldstein: As each year rolls on, we're continually seeing companies that bring in consultants raise the bar on their insurance requirements. The limit requirements are growing. I don't think we've ever seen the limits that are now requested. Whereas maybe $1 million was common five years ago, $3 million might be more common now.
AAB: What are the typical limits? Goldstein: The most commonly purchased is still $1 million, but we see everything.
AAB: What about independent contractors? Goldstein: Typically, independent contractors will be covered by most policies in the marketplace. Our distinction is that we'll also defend that contractor. We'll treat them as the insured, if they meet the applicable policy definitions and conditions.
AAB: Any overall trends you're noticing right now in miscellaneous E&O? Goldstein: There's some pain out there from the credit crunch. Mortgage brokers are under a heightened scrutiny. But as far as the market mechanisms and such, there's not too much else. It's viewed as an attractive insurance marketplace for insurers that have the know-how, which plays to our advantage.
AAB: Speaking of which, how are you dealing with the soft market?
Goldstein: I would say this: The quality of service and the quality of product we offer makes us unique. We'll continue to leverage our expertise, financial strength, service platform and producer relationships to differentiate ourselves and grow profitably under any market conditions.
AAB: How do your miscellaneous products compare with the dedicated professional liability policies?

Goldstein: We tend to be more generous with coverage; it tends to be broader. There's very little in our policies, for example, in the way of restrictions–if you lose your license, if you don't do X, Y or Z, and so on. We don't have any requirement that you have to report growth in your staff or business during the policy period. We don't find ourselves running our customers' businesses; we recognize that their businesses are evolving and changing and we provide the expertise to make sure their coverage evolves with them.
AAB: How does it look from here on out? Goldstein: I see the market stable over the next year. My advice for agents and brokers is to know the policy forms and the quality and track record of the carriers with whom they place business. Customer needs will get increasingly complex, and the professional liability market shows promise for expansions as new professions, new firms and new buyers continue to emerge.