In today's litigious society, people are increasingly willing to hold professionals responsible for errors, real or perceived. Consumer awareness, in fact, "has definitely become one of the biggest drivers of E&O claims," says David Egosi, vice president, Professional Liability for Hiscox USA.
"These days, if you don't like the way a debt collector treats you, or if a telemarketing company interrupted your Tuesday night dinner, it doesn't take much more than a quick Google search to find out that you might not be the only one," Egosi adds. "That can often lead to class-action claims, and there are plenty of law firms that make a living litigating them."
This mentality has led to growth in the Professional Liability market as a whole. In addition to sales of specialized coverage targeted to traditional classes — doctors, lawyers, accountants, and engineers — brokers report strong interest in miscellaneous Professional Liability among a wide range of clients.
"We are seeing companies that had only been buying General Liability products looking to add Professional Liability," says Mickey Estey, senior vice president and E&O practice leader at RT ProExec, a division of RT Specialty in California. "For instance, manufacturers, particularly those that create custom products, recognize that they have an exposure not just for products liability, but for the potential of financial loss to the customer due to a failure of design or manufacture."
'No shortage'
At the same time, more carriers are offering to sell it. "Professional Liability continues to be a very crowded space," says Jeff Klenk, senior vice president, Travelers Bond & Specialty Insurance. "Traditional insurers, niche players, state programs, and captives make for one of the most competitive spaces in the broader management liability marketplace. There is no shortage of capacity."
"We probably use 80 to 100 different professional lines insurance companies," says David Lewison, senior vice president and national practice leader for professional lines at AmWINS. "We're always trying to consolidate and use fewer, but it's difficult to do that because each company has its own strength."
Strong capacity has kept rates stable during the past several years, with renewal pricing on problem-free accounts ranging from flat to single-digit decreases. However, the Professional Liability sector is hardly monolithic. Across the mosaic of different industries seeking coverage, agents and brokers will find key differences in rates, coverage and underwriting appetite.
"In some of the traditional markets — architects and engineers, medical malpractice — there are plenty of carriers willing to write coverage. When you get into manufacturers' E&O, there is a limited number of markets available, so if someone needs a lot of limit, that can be an issue," Estey says.
Problem placements
One of the more problematic areas for agents has been the real estate market. When the economy turns south, E&O suits spike as property owners try to recover loss in value to their property. "In the wake of 2008, when the real estate market wasn't pretty, claims blew through E&O for title agents. They were impossible to place for years," says Lewison.
As the economy improved, underwriting appetite for this class expanded. "Previously we had about five markets that would take title agents; now we're seeing over a dozen. A few years ago, agents that had been paying $5,000 for coverage were suddenly paying $10,000 and then $15,000; now it's back to under $10,000. We are also having success placing agents that have had problems as long as they've cleaned up their act," Lewison adds.
Debt collectors are also a particularly difficult class to place. "We're always trying to get coverage for Telephone Consumer Protection Act claims but are often faced with exclusions or sublimits on coverage," Lewison continues. "It's a class that really scares underwriters, particularly debt collectors that buy bad debt from another company at a discount and then try to collect from the debtor. Those businesses tend to push even harder, which creates more lawsuits. It's a tough class that often finds its way to the wholesale space."
Companies with only a few employees can be a challenge to insure. "The majority of underwriters are looking for the larger firms with well-established track records. We have wholesale markets that will look at smaller accounts, but they only want a limited number of them," adds Lewison.
Brokers can take advantage of strong sector capacity to grow their Professional Liability business. (Image: Shutterstock)
Cyber tops claims concerns
A never-ending stream of data-breach headlines has spurred interest in Cyber coverage offered in the Professional lines marketplace. "Cyber used to be something that only really large companies took stock in. That has completely changed," says Maureen Le Piane, J.D., Allianz practice group leader in cyber, technology, media, and lawyers' and accountants' E&O.
For professionals, the concern is being held responsible for breaching a duty of care around their company's cyber security. Le Piane says that the majority of clients seeking coverage are those that deal with large amounts of personally identifiable information, including healthcare and financial data.
However, companies across all sectors are coming to realize that, regardless of their size, they face exposure to loss if they hold customer information, trade secrets, intellectual property, and other valuable data. There has been a rise in interest in Cyber among telecom, energy, and manufacturing clients.
Media an issue, too
"The typical coverages we see being added to professional forms across the industry are, No. 1, Cyber, and No. 2, media professional," which covers defamation, invasion of privacy, and infringement of copyright, Estey says. "In an era where so much business is done online, it's easy to get into issues around not just breach or loss of data, but around violation of intellectual property and other professional issues."
Although Cyber losses make headlines, most E&O claims arise from classic mistakes. "Lack of clarity on the scope of the professional engagement and poor client intake and vetting procedures continue to be common claim issues," says Klenk.
Another exposure trend for many professionals involves scope creep, which "happens when someone is hired for a particular project with defined goals and parameters, and [ends up] completing work outside the original scope of the project," Klenk notes.
Worrisome to agents and brokers is a trend of increased frequency and severity of agents' E&O claims. "Courts are expanding the duty of agents to advise their clients and eroding the duty of the insured to read a policy. Agents are no longer seen as just order-takers, and carriers are more willing to litigate against agents," says Gary Mann, E&O practice group leader at Allianz.
Agents can capitalize
Although some sectors pose challenges, agents and brokers can take advantage of strong capacity across the Professional Liability sector as a whole to grow their business.
"Agents should be looking for coverage enhancements that carriers offer and additional services they provide to differentiate themselves," says Lewison. Common enhancements include free contract review services for architects and contractors, phone consultation with legal experts, and cyber coverage.
Brokers should also dig deep for opportunity within their existing commercial lines portfolio.
"Agents need to continually assess their clients' operations," says Estey. "Look across the book of business and see what type of services those companies are really providing that require professional coverage." For instance, one of his clients conducted mining and forestry operations on its own property. When the client leveraged that expertise to create a land management professional service for other companies, Estey recommended putting E&O coverage in place.
"That is a miscellaneous exposure that fits the professional market," he adds. "As companies change and grow, they can often create E&O exposure they didn't have before."
"There is no shortage of capital in the marketplace," says Egosi. "For those that can add value to their clients, there will always be opportunities."
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