Summary: Virtually any business or firm can become liable for injury to others resulting from a condition on its premises or arising out of its operations-in-progress, products, completed work, etc. Covering those exposures is the purpose of various forms of general liability insurance, as discussed elsewhere in this tab. Persons or organizations that render professional services face an additional liability exposure — their failure to use due care and the degree of skill expected of a person in a particular profession. Insurance for this exposure is known variously, and without complete consistency, as professional liability insurance, malpractice insurance, or errors and omissions liability insurance.
This article presents a general introduction to the area of professional liability insurance and the standard coverage forms that are available to insureds. The articles that follow this one discuss the particular coverage forms.
Topics covered:
Available forms
Notable features
Available Forms
A great deal of professional liability insurance is issued through Lloyd's and other nonstandard forms, a number of which are discussed in the Specialty Lines pages of the Companies and Coverages volume. As for standard forms, Insurance Services Office (ISO) maintains standard coverage parts for the hospital professional, as well as for physicians, surgeons, and dentists professionals. A number of other miscellaneous professional liability coverage forms are also available. Rules and rating procedures are contained within division seven of the commercial lines manual (CLM).
These standard forms include both an occurrence version and claims-made version.
Notable Features
Unlike other liability coverage, professional liability insurance is not restricted to liability for injury caused by an occurrence (i.e., caused by an accident). In many cases, the professional person will do exactly what he or she intends to do, but, for example, a diagnosis will turn out to be faulty and the patient injured as a result. Injury of this type might not be “caused by an occurrence,” and often has been the basis of liability.
Another feature in the professional liability coverage is that none of the professional insuring agreements are framed in terms of “bodily injury” and “property damage.” The hospital liability and physicians liability forms, for example, both apply to damages because of “injury” resulting from professional services. Since “injury” is not defined in either form, the term is felt by many to encompass bodily injury and property damage, as well as “personal injuries” like humiliation, invasion of privacy, and slander, if arising out of professional services.
Lawyers liability insurance covers damages resulting from a wrongful act, a defined term that means “any act or omission that arises out of the rendering of or the failure to render professional services”. (Note, however, that the form excludes both bodily injury and damage to tangible property.) The principal exposure that lawyers liability insurance does cover is monetary loss attributable to the insured's malpractice. An example is a judgment entered against a client as a result of the insured's failure to provide such defense as the client was entitled to expect from a qualified attorney.
For much of their history, hospital liability and physicians liability insurance were issued subject to a per claim limit of liability and an aggregate limit of liability. The per claim limit applied to each claim made against the insured regardless of the number of claims arising from a single act or omission, and the aggregate limit was the most that would be paid as damages on behalf of the insured during any policy year. In 1977 a modified form was introduced in many territories that replaced the per claim limit with a per “medical incident” limit. The purpose of the change was to eliminate the availability of the full limit of liability for each of the several claims that might result from a single act or omission on the part of the insured. For example, a patient and his family might make separate claims against a physician for damages resulting from the same alleged instance of malpractice. Under the earlier forms, the per claim limit would apply separately for each claim. Under the later forms, the per “medical incident” limit is the most that can be collected for both claims.
By the same token, bureau forms for professional liability insurance traditionally required the insurance company to have the insured's written consent before settling any claim, a point once considered so important that early malpractice policies were titled “physicians defense”. The reputation of the professional person was regarded as such a critical asset that an insurer was not allowed to settle any claim until all legal remedies were exhausted. The consent-to-settle feature was not, however, carried forward in the current editions of hospital liability and physicians liability insurance.
Revised editions of the hospital professional liability and physicians professional liability forms were released in 2008. The following coverage forms have also been published with an edition date of September 2008: allied health care providers professional liability form, blood banks professional liability form, diagnostic testing laboratories professional form, optometrists form, and veterinarians form (most of these coverages were previously provided as endorsements, but now are stand-alone coverage forms).