Miscellaneous Professional Liability Analysis
July 27, 2017
Summary: Miscellaneous professional liability is sometimes called Errors and Omissions liability. It protects businesses and individuals against claims made for inadequate work or negligent actions in performing a professional service. Even the most meticulous companies or individuals who perform professional services for other people can make mistakes. Details can be overlooked, facts can be misstated, important tasks can be forgotten, and things can be misplaced. A company whose employee has made a mistake can be sued by clients over allegations of errors, omissions, misrepresentation, failure of timeliness, or failure to keep client information confidential. A multi-million dollar lawsuit could sink almost any company. Because we live in such a lawsuit-obsessed society, whenever someone makes a mistake, missteps, or somehow causes someone else harm the general response is “sue!”
In fact, a company doesn't have to do anything wrong and a suit may still be brought. Despite how meritless a lawsuit might be, it still must be defended. Some firms and professions require or strongly suggest that their professionals carry professional liability insurance in case a mistake is made. Some professions that carry such a high risk of incurring legal liability while on the job are attorneys, doctors, teachers, therapists, physical or occupational therapists, brokers, accountants, and contractors. ISO has developed a new Miscellaneous Professional Liability form MI 00 01 06 17 which is discussed in this article. ISO introduced this form in order to help insurers cover one of the most quickly growing sectors of the U.S. economy, professional services. According to statistics from the U.S. Department of Labor, the professional services industry rose by 542,000 in just the last year, accounting for about 23% of nonfarm job growth. The form provides coverage for the defense of professional disciplinary and licensing proceedings due to the increased regulatory activity and oversight that many professional services face today. The form joins several other professional liability coverage forms including forms made for lawyers, and real estate and insurance agents and brokers.
Topics covered:
Section I – Insuring Agreement
Section II – Limit of Liability
Section III – Defense and Settlement
Section VI – Coverage Enhancements
Section VII – Coverage Extension
Section X – Extended Reporting Periods and Run-Off Coverage Period
Insuring Agreement
“We” will pay on “your” behalf all “loss” that “you” are legally obligated to pay in excess of the Retention shown in the Declarations for each covered “claim”:
A. First made against “you” during the “policy period” or applicable Extended Reporting or Run-Off Coverage Period;
B. Alleging a “wrongful act” that first occurred on or after the retroactive date but before the end of the “policy period”; and
C. Reported to “us” in accordance with the terms of this policy.
Analysis
The Miscellaneous Professional Liability Policy was designed to provide claims-made and reported coverage. The coverage is generally provided for damages and defense costs that result from a “wrongful act” in connection with the performance of or failure to perform professional services to which this insurance applies. The “wrongful act” must occur in the coverage area and on or after the retroactive date. A “wrongful act” is defined as any actual or alleged act, error, misstatement, misleading statement, omission, neglect, breach of duty committed, attempted or allegedly committed or attempted solely in the performance or failure to perform “professional services”. For example, a CPA provides incorrect information to a client which results in the client being heavily fined by the IRS; the CPA's dispensing of incorrect information is a “wrongful act”.
Limit of Liability
The Aggregate Limit of Liability shown in the Declarations is the most that “we” will pay for all “loss”. The Each Claim Limit shown in the Declarations shall be part of, and shall reduce, the Aggregate Limit of Liability. The Each Claim Limit is the most “we” will pay for all “loss” for each “claim” regardless of the number of claimants. The purchase of an Extended Reporting Period or Run-Off Coverage Period shall not increase or reinstate the applicable Limit of Liability for the “policy period”, and shall be part of, and not in addition to, any Limit of Liability applicable to the “policy period”.
Analysis
The Each Claim Limit is deliberately calculated to be the most that will be paid for any losses arising out of any one claim. The Each Claim Limit is subject to the Aggregate Limit of Liability, and all losses paid under the Each Claim Limit reduce the Aggregate Limit of Liability. The Aggregate Limit of Liability is designed to be the most that will be paid for all losses due to all wrongful acts in connection with the performance of the professional service that is covered by this professional liability policy. For example, the Aggregate limit is $5 million, and the “each claim” limit is $2.5 million. The insured causes several clients to be heavily fined by the IRS and multiple claims are filed; one for $700,000, one for $2 million, one for $3 million. Under the “each claim” limit the first two claims wil be paid fully, which is $3.2 million, because each claim is below the “each claim” limit. The third claim will only receive $2.5 million, as it is over the “each claim” limit. However, the total of these claims exceeds the aggregate limit; the total of the three claims is $5.7 million. Therefore, the carrier will only pay a total of $5 million, the aggregate. The carrier will negotiate with the claimants the amount o be paid. If the carrier pays proportionally to the aggregate limit, the first claimant will receive $460,000, the second will receive $1.6 million, and the last claimant will receive $2.4 million.
Defense and Settlement
A. Defense
“We” have the right and duty to defend any covered “claim”, including the right to select defense counsel, even if such “claim” is groundless, false or fraudulent. “We” also have the right to investigate any “claim”. “We” will not be obligated to defend, or to continue to defend, any “claim” after the applicable Limit of Liability has been exhausted by payment of “loss”.
B. Settlement
1. “We” shall have the right to negotiate and settle any “claim”, but will not enter into any settlement without “your” consent. If “you” withhold consent to a settlement recommended by “us” and acceptable to the claimant, “our” duty to defend ends, and the most “we” will pay for that “claim”, in an amount not to exceed the Each Claim Limit, is the sum of:
a. The amount that “we” could have settled the “claim” for;
b. “Defense costs” incurred up to the date of “your” refusal to settle the “claim”;
c. 50% of all “defense costs” incurred after “your” refusal to settle the “claim; and
d. 50% of all “damages” in excess of the settlement amount recommended by “us”.
2. “We” shall not be liable for any settlement or “defense costs”, assumed obligations or admissions to which “we” have not consented. “You” may, however, settle any “claim” on behalf of all “insureds” to which “we” have not consented. “You” may, however, settle any “claim” on behalf of all “insureds” to which this insurance applies and which are subject to one retention amount where the total incurred “loss” does not exceed the retention amount.
Analysis
According to this provision, the insurer has the right and duty to defend any claim, investigate the claim, and choose defense counsel. The insurer is not obligated to defend any claims once the Limit of Liability has been reached by the previous payment of losses. The insurer also has the right to negotiate and settle any claim, but the insurer will not enter into a settlement without the consent of the insured. If the insurer recommends a settlement and the insured does not consent, the amount that would have been paid out by the insurer is subject to the Each Claim Limit and should not be greater than the amount the claim would have been settled for if the settlement had been accepted, defense costs up until the refusal, 50% of defense costs incurred after the refusal, and 50% of damages in excess of the settlement amount recommended by the insurer. This provision allowing 50% of defense costs after refusal and 50% of excess damages is new and very lenient for an ISO policy.
For example, consider a case where the insured is offered a $100,000 settlement that the claimant and the insurer both agree to, but has refused to take the settlement offer. Imagine that the defense after the refusal cost $10,000 and the total damages were $200,000.
Settlement Offer: $100,000
Defense after Refusal: $10,000
Damages Excess to Settlement Offer: $100,000
The insurer would pay:
the initial $100,000 that they would have settled the claim for,
the defense costs incurred prior to the refusal of the settlement.
$5,000 which is 50% of all defense costs after the refusal to settle the claim, and
$50,000 which is 50% of all damages in excess to the settlement amount.
Thus, the insured would be covered for $155,000 and would be responsible for the other $55,000.
Retention
“We” will only pay for “loss” once the amount of “loss” exceeds the Retention shown in the Declarations for each “claim”. The terms of this Policy, including those with respect to “our” right and duty to defend “claims” and “your” duties under the Policy, apply irrespective of the application of the retention amount. Such retention amount must be borne by the “insured” and remain uninsured.
Analysis
According to this provision, loss in excess of the Retention will be paid up to the Limit of Liability for each claim. When the Declarations section is written, the Retention amount shown is designed to apply to each covered claim that arises out of the same wrongful act or interrelated wrongful acts regardless of the number of insureds or entities involved in making the claims.
Related Claims
All “claims” arising out of the same “wrongful act” or any combination of “interrelated wrongful acts” shall be considered a single “claim” subject to one Retention amount and one Each Claim Limit shown in the Declarations. Such single “claim” will be deemed to have been made at the time the first “claim” was made in accordance with the provisions of Subsection IX.H. Reporting, Notice And Duties In The Event Of A Claim Or A Wrongful Act That May Result In A Claim of this Policy.
Analysis
The Related Claims provision states simply that all claims arising out of the same wrongful act or interrelated wrongful acts will be considered a single claim for the purposes of the Each Claim Limit and the Retention Limit in the Declarations.
Coverage Enhancements
The amount paid by “us” under this section will not reduce the Aggregate Limit Of Liability shown in the Declarations, nor be subject to the Retention shown in the Declarations. Nevertheless, “our” obligation to make any payments under this section ends when the Aggregate Limit of Liability has been exhausted by the payment of “loss”.
A. For each Coverage Enhancement, “we” will pay up to the Coverage Enhancement Limit shown in the Declarations for all reasonable and necessary costs, charges, fees and expenses incurred with “our” prior consent regardless of the number of proceedings or investigations to:
1. Defense Of Disciplinary Proceedings
Defend a proceeding against “you” before a regulatory or disciplinary official, board or agency to investigate charges of a “wrongful act”.
2. Defense Of Licensing Proceedings
Investigate, defend or appeal any state, federal or other licensing board inquiry or proceeding concerning “your” eligibility or license to engage in “your” “professional services”.
3. Subpoena Assistance
Respond to a subpoena arising from any actual or alleged “wrongful acts” committed by “you”.
For coverage to apply, “you” must first receive notice of the proceeding or investigation during the “policy period” for “wrongful acts” occurring on or after the Retroactive Date shown in the Declarations which are reported to “us” within 30 days of “your” receipt of such notice.
B. Insured Person's Loss Of Earnings
“We” will pay up to $500 per day for an “insured person's” actual loss of earnings when that “insured person” attends a hearing, deposition or trial at “our” request. “We” will not pay more than $10,000 for all “insureds” during the “policy period” or any applicable Extended Reporting Periods Or Run-Off Coverage Period.
Analysis
Coverage Enhancements do not reduce the limit of liability, nor are they subject to the retention in the declarations, but this provision specifically states that the insureds obligation to make payments ends when the limit of liability is met after payment of the loss. In order for coverage to apply the insured must, during the policy period, first receive notice of proceedings for wrongful acts that occurred during or after the retroactive date, and the insured must report such proceedings to the insurer within 30 days of receipt of the notice. The Coverage Enhancements provision includes separate limits for the defense of Disciplinary and Licensing Proceedings and Subpoena Assistance, and up to $500 per day for loss of earnings for each insured person with an aggregate limit of $10,000. As stated above, neither of those payments reduce the Aggregate Limit of Liability and are not subject to a retention. If the aggregate limit is $5 million, the defense of disciplinary proceedings is $100,000 and the subpoena assistant limit is $50,000 then the total paid out for that claim will be $5,250,000. Only once the aggregate limit is exhausted will the enhancements limit end.
Coverage shall extend to “claims” for “wrongful acts” of an “insured person” made against:
A. The lawful spouse or domestic partner of such “insured person” solely by reason of such spouse or domestic partner's status as a spouse or domestic partner, or such spouse or domestic partner's ownership interest in property which the claimant seeks as recovery for an actual or alleged “wrongful act” of such “insured person”;
B. The estate, heirs, legal representatives or assigns of such “insured person” if they are deceased, or the legal representatives or assigns of such “insured person” if they are legally incompetent, insolvent, or bankrupt; or
C. A trust of such “insured person” and any legally approved trustees of such trust.
This extension shall not afford coverage for any actual or alleged “wrongful act” committed by or directly involving the spouse or domestic partner, estate, heirs, legal representatives, trustees or assigns but shall apply only to “claims” arising out of any actual or alleged “wrongful acts” committed by or directly involving an “insured person”.
Analysis
According to this provision, coverage extends to an insured person's spouse or domestic partner or because of their ownership interest in property sought as recovery by a claimant. Coverage is also extended to the estate, heirs, and legal representatives or assigns of insured persons that are deceased, legally incompetent, insolvent or bankrupt and to any insured person's trusts and appointed trustees. This extension is not designed to provide coverage for the wrongful acts of these individuals.
Exclusions
“We” shall not be liable for “loss” or obligated to defend any “claim” made against any “insured” based upon, arising out of or attributable to:
A. Abuse or Molestation
1. The actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any “insured”; or
2. The negligent:
a. Employment;
b. Investigation;
c. Supervision;
d. Reporting to the proper authorities, or failure to so report; or
e. Retention;
of a person for whom any “insured” is, or ever was, legally responsible, and whose conduct would be excluded in the preceding Paragraph 1.
Analysis
This first exclusion precludes coverage on the part of the insured for any abuse or molestation to a person in the care, custody or control of the insured. It also excludes coverage for negligent employment, supervision, failure to report, investigation, and retention of a person is legally responsible for. Since the word “abuse” is not defined in the policy it can be considered to include physical, emotional, and verbal abuse, and sexual abuse and molestation. This is an exclusion that is typical for forms such as Employment Practices, Insured Entity, and Directors and Officers. The policy is designed to not provide coverage for bad intentional acts of abuse or molestation, as incidents of abuse and molestation often occur in cases where one party is in the care, custody or control of another party. Likewise, any employee or volunteer that the insured supervises who engages in such action is excluded. It is a straightforward exclusion that is very broad in reach and complements exclusions D, H, and J which are discussed below.
B. Access or Disclosure of Confidential or Personal Information and Data-Related Liability
1. Any access to or disclosure of any person's or entity's confidential or personal information, including patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other type of nonpublic information; or
2. The loss of, loss of use of, damage to, corruption of, inability to access or inability to manipulate “electronic data”.
This exclusion applies even if “damages” are claimed for notification costs, credit monitoring expenses, forensic expenses, public relations expenses or any other loss, cost or expense incurred by “you” or others arising out of that which is described in paragraphs 1. or 2. above.
Analysis
This exclusion states that there is no coverage if someone tries to sue the insured for a data breach. This endorsement reinforces the coverage intent as damages that occur due to access or disclosure of nonpublic information may be more appropriately covered under a stand-alone policy such as a cyber liability policy.
C. Antitrust
Any actual or alleged restraint of trade, monopolization, unfair trade, price fixing, violation of the Federal Trade Commission Act, the Sherman Anti-Trust Act, the Clayton Act, or any of their amendments, or any similar federal, state or local statutes, rules, or regulations or similar laws under any other jurisdiction anywhere in the world.
Analysis
This exclusion is designed to exclude coverage for claims based on, arising out of, or attributed to the insureds actual or alleged anticompetitive behavior. Despite being named the “antitrust exclusion” this exclusion precludes coverage for a much broader array of claims, largely due to the wide extension of the exclusion to “any claim 'based upon or arising out of' any actual or alleged' restraint of trade.“
D. Bodily Injury or Property Damage
1. Bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. It also means mental injury, mental anguish, mental tension, emotional distress, pain or suffering or shock sustained by any person, resulting from injury to the body, sickness, disease or death of any person; or
2. Physical injury to tangible property, including all resulting loss of use of that property or loss of use of tangible property that is not physically injured.
Analysis
A self-explanatory provision, the Bodily Injury or Property Damage exclusion is designed to exclude coverage for claims based on, arising out of, or attributable to Bodily Injury or Property Damage. This provision emphasizes that even if the property is not damaged, but still sustains a loss of use, that damage is not covered. These actions are not a professional liability service and coverage is more appropriately provided by General Liability coverage.
E. Breach of Contract and Assumed Liability
The actual or alleged breach of any contract or agreement or any liability of others assumed under a contract or agreement by any “insured”. This exclusion shall not apply to any “loss” that an “insured” would have been liable for in the absence of such contract or agreement.
Analysis
This exclusion precludes coverage for claims caused by a breach of contract or any other liability assumed by an insured under a contract or other form of agreement. The exclusion extends to both oral and written contracts and agreements. This exclusion is included so the insurer doesn't take on any liability for the insureds contractual agreements.
F. Breach of Warranty, Guarantee or Promise.
Any actual or alleged breach of a warranty, guarantee or promise, provided that this exclusion shall not apply to “loss” that an “insured” would have been liable for in the absence of such warranty, guarantee, or promise.
Analysis
This exclusion was designed to preclude coverage for claims based on an insured providing a warranty, guarantee, or promise related to future performance or appraisal.
G. Business Enterprise
1. “Professional services” rendered by any “insured” to any business enterprise if at the time those services were rendered:
a. The business enterprise was directly or indirectly owned, controlled, operated, or managed by any “insured” or any “insured's” spouse; or
b. Ownership or control by any “insured”, their spouse, or any cumulation of ownership control by “insureds” or their spouses, exceeded 10%.
2. “Professional Services” rendered by a business enterprise that, at the time such “professional services” were rendered:
a. Was directly or indirectly owned, controlled, operated or managed by any “insured” or any “insured's” spouse; or
b. Ownership or control by any “insured”, their spouse, or any cumulation of ownership or control by any such insureds or their spouses, exceeded 10%.
Analysis
It is designed to exclude claims arising out of professional services rendered by an insured, or an insureds spouse, to any business enterprise or by a business enterprise to the insured or an insured's spouse if either party owns, controls, operates, or manages the other party. This exclusion is related to and refers to claims arising out of an insureds serving in a position or organization other than that of the named insured company. For example, an insured can serve as trustees or officers for charitable organizations, or serve as board members or outside counsel for a business other than the named insured business. If so, MI 00 01 06 17 will not cover claims arising from these outside activities, since there is no practical way for an insurer to monitor or appropriately underwrite such outside activities.
H. Employment Practices Violations and Discrimination
1. The actual or alleged refusal to employ, wrongful termination of employment, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, libel, slander, or any other employment-related practices, policies, acts, errors or omissions.
2. The actual or alleged “discrimination” by “you” against any “insured” or any other person or entity.
Analysis
This exclusion is designed to exclude discrimination claims made by insureds and third parties, or claims based on an insured's employment-related practices. There is a general law that forbids discrimination in employment against minorities or others due to age, race, gender, national origin, religion, and disability. An insurer cannot foresee the risk of discriminatory or other employment practices violations, and thus cannot charge an adequate premium for coverage of such actions. If an insured violates a person's civil rights or harasses an employee or otherwise engages in practices that are related to employment but also violate established federal, state, or local statutes, rules or regulations and a claim arise, the coverage provided by the Miscellaneous Professional Liability Policy would not apply.
I. Fees, Costs, Charges or Estimates
Any actual or alleged fees, costs or charges or of any estimates made by “you” that are exceeded.
Analysis
This exclusion is designed to exclude claims based on any actual or alleged fees, cost overruns, or charges or any estimates that the insured made that are exceeded.
J. Fraudulent, Criminal, Malicious, Dishonest, or Intentional Acts.
Any deliberately fraudulent, criminal, malicious or dishonest act or omission, or any willful violation of any statute or regulation by an “insured”. This exclusion shall not apply to “defense costs” or terminate “our” duty to defend such “claim” unless and until there is a final, nonappealable judgment or adjudication against “you” that establishes such conduct.
This exclusion shall apply to the “organization” only if:
1. The conduct was committed or allegedly committed by any past, present, or future chief executive officer, chief financial officer, chief operating officer, general counsel, partner or member of the board, or equivalent position; or
2. The chief executive officer, chief financial officer, chief operating officer, general counsel, partner or member of the board or equivalent position of the “organization” knew, or had reason to know, of such conduct by any “employee”.
This exclusion shall only apply to an “insured person” who:
1. Personally committed;
2. Personally participated in;
3. Personally acquiesced to; or
4. Remained passive after having personal knowledge of any such acts, errors or omissions.
Analysis
This exclusion applies to the organization, in general, if past, present or future senior management or board members either engage in the conduct at issue or knew or should have known that an employee engaged in that sort of conduct. The Fraudulent, Criminal, Malicious, Dishonest, or Intentional Acts exclusion is designed to apply to any insured person who personally committed, participated in, acquiesced to, or remained passive after having personal knowledge of such acts, errors or omissions. Also the exclusion is specifically designed to not affect the duty of an insurer to defend prior to a legal determination by the insured.
K. Fungi or Bacteria
1. Any actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any “fungi” or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.
2. The abating, testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, remediating or disposing of, or in any way responding to, or assessing the effects of, “fungi” or bacteria, by any “insured” or by any other person or entity.
Analysis
This exclusion is the mold exclusion, and prevents coverage for any loss, cost or expense arising out of exposure to any fungi (defined as mold or mildew and any mycotoxins, spores, scents or byproducts produced or released by fungi) or bacteria on or within a building, including the buildings contents. Cleanup expenses are also excluded.
L. Governmental And Regulatory Entity
Or, bought or maintained by or on behalf of any governmental or quasi-governmental entity, regulatory or administrative agency or authority, provided that this exclusion shall not apply to “loss” if such entity, agency or authority brings the “claim” solely in its capacity as the client or customer of any “insured” for “professional services”. This exclusion shall also not apply to any coverage provided by Section VI – Coverage Enhancements.
Analysis
This exclusion excludes claims brought by any governmental, regulatory or similar authority, except when the claim is brought by the entity solely in its capacity as a client or customer of an insured. Any coverage granted by a Coverage Enhancement is still valid despite this exclusion.
M. Improper Use of Funds
Any “claim” arising out of an “insureds”:
1. Conversion, defalcation or commingling of funds, or the embezzlement, misappropriation or improper use of funds.
2. Illegally gained profit, remuneration or monetary advantage; or
3. Inability or failure to pay, collect, safeguard or return any funds.
Analysis
This exclusion makes it clear that this form does not apply to any claim arising out of an insured's conversion, commingling, embezzlement, or misappropriation of funds. All of those actions are illegal, and this coverage is not designed to cover illegal acts. If the insured, for example, misappropriates trust funds held in fiduciary capacity by the insured, this policy is not going to cover the claim resulting from that act. This exclusion also refers to the inability or failure to pay, safeguard, or return any money; basically, this exclusion repeats itself in order to demonstrate that the policy is not meant to apply to claims arising out of the improper use of funds entrusted to the insured.
N. Insured Versus Insured
Any “claim” brought by or on behalf of any “insured” by any other “insured”.
Analysis
This exclusion is self-explanatory, as it is designed to exclude claims brought by or on behalf of any insured against any other insured.
O. Intellectual Property
Any infringement, violation or misappropriation of any idea, including any advertising idea, slogan, copyright, patent, trademark, trade dress, trade name, and trade secret; or any violation of a federal, state, local or foreign intellectual property law, or a rule or regulation promulgated under such intellectual property law.
Analysis
As stated, this exclusion prevents coverage for claims based on infringement, violation or misappropriation of any idea, including any advertising idea, slogan, copyright, patent, trademark, trade dress, trade name and trade secret; or any violation of a federal, state, local, or foreign intellectual property law, or a rule or regulation promulgated under such intellectual property law.
P. Personal Injury
1. False arrest, detention or imprisonment;
2. Malicious prosecution;
3. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies committed by or on behalf of its owner, landlord or lessor;
4. Oral or written publication, in any manner, of material that slanders or libels a person or entity or disparages the goods, products or services of any person or entity; or
5. Oral or written publication, in any manner, of material that violates a person's right of privacy.
Analysis
This exclusion informs the insured that claims based upon, arising out of or attributable to personal injury as defined in MI 00 01 are excluded.
Q. Pollution
1. The actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time;
2. Any request, demand, order or statutory or regulatory requirement that any “insured” or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or asses the effects of, “pollutants”; or
3. A “claim” or suit by or on behalf of any governmental authority for “damages” because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, “pollutants”.
Analysis
The pollution exclusion is a typical exclusion in liability policies. It applies to any claim based on, attributable to, or arising out of any release of escape of pollutants at any time, in effect excluding all pollution in any form or manner. Clean up costs are also excluded, as are requests or requirements for testing for pollutants, and claims or suits by or on behalf of government authority for damages because of testing for or cleaning up of pollutants.
R. Prior Notice
Any fact, circumstance, “wrongful act” or “interrelated wrongful act” alleged or contained in any “claim”, or that has been given and accepted under any other prior insurance policy providing similar coverage for “wrongful acts”.
Analysis
The Prior Notice exclusion is designed to exclude claims arising out of a wrongful act alleged or depicted in a claim or notice that has been given and accepted under any other prior insurance policy providing similar coverage for wrongful acts. In short, this exclusion prevents coverage for claims that have already been reported to, and accepted by an insurer, or by any other insurer who provides coverage for similar wrongful acts.
S. Prior or Pending Litigation
1. Any “claim”, administrative or regulatory proceeding or investigation, or licensing proceeding filed or commenced against “you” on or prior to the Prior Or Pending Litigation Date shown in the Declarations; or
2. The same or substantially the same “wrongful act”, “interrelated wrongful act”, fact or circumstance alleged in or underlying such “claim” or proceeding.
Analysis
This exclusion states that the policy will not apply to any claim or lawsuit against any insured that was pending on, or existed prior to the applicable date shown in the declaration. This exclusion attests to the fact that the Miscellaneous Professional Liability Policy will not provide coverage for claims or lawsuits that have commenced before the effective date of the policy.
T. Recording And Distribution of Material in Violation of Law
Any actual or alleged violation of the:
1. Telephone Consumer Protection Act (TCPA)
2. CAN-SPAM Act of 2003;
3. Fair Debt Collection Practices Act (FDCPA); or
4. Fair Credit Reporting Act (FCRA) including the Fair and Accurate Credit Transactions Act (FACTA);
and any amendments of or additions to such law, or any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003, FDCPA or FRCA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.
Analysis
This is a self-explanatory exclusion, preventing coverage in cases involving violations of The Telephone Consumer Protection Act, The CAN-SPAM Act of 2003, The Fair Debt Collection Protection Act, the Fair Credit Reporting Act and any amendments and similar federal state or local laws. These laws deal with what is a commercial email, debt collection practices, and other consumer issues. This exclusion is one typical for liability policies.
U. Statutory Violations
Any actual or alleged violation of the:
1. Securities Act of 1933;
2. Securities Exchange Act of 1934;
3. Employee Retirement Income Security Act of 1974 (ERISA);
4. Racketeer Influenced and Corrupt Organizations Act (RICO);
5. Sarbanes-Oxley Act of 2002; or
6. Foreign Corrupt Practices Act of 1977 (FCPA);
and any amendments thereof, or any similar federal, state or local statutes, rules, or regulations or similar laws under any other jurisdiction in the world.
Analysis
Also a self-explanatory exclusion, the Statutory Violations exclusion is designed to exclude claims arising out of any violation of several statutes including the Securities Act of 1933, the Securities Exchange Act of 1934, the Employee Retirement Income Security Act of 1974, the Racketeer Influenced and Corrupt Organizations Act, the Sarbanes-Oxley Act of 2002, the Foreign Corrupt Practices Act of 1977 and any amendments or other similar laws anywhere and under any other jurisdiction in the world. Violations of any of these statutes and acts are a violation of law and violations of law are not covered under the policy.
V. Workers' Compensation and Similar Laws
An “insured's” obligation under a workers' compensation, disability benefits or unemployment compensation law, or any other similar laws.
Analysis
This exclusion is designed to prevent coverage for claims that should fall under a workers compensation law, disability benefits law, an unemployment compensation law, or any similar law. Workers' compensation benefits are established by state law and usually insured through commercial insurers or state funds via policy designed specifically to respond to the law. Disability or unemployment benefits, in states where such benefits are required by law, may also be covered by state funds or insurance policies designed specifically to provide the necessary or required coverage. The exclusion applies even if the insured has not purchased the statutorily required coverage.
Conditions
A. Assignment
No change in, modification of or assignment of interest under this Policy will be effective without “our” written consent.
Analysis
This provision merely states that assignments of interest are not effective unless the insurer gives written consent. The need for assignment is rare, so the practical implications of assignment provisions are normally of little concern. These provisions are necessary, though, because without such provisions insurers could inadvertently assume risks that were not originally contemplated when determining the appropriate premium and terms.
B. Bankruptcy
Bankruptcy or insolvency of the “insured” or of the “insured's” estate will not relieve “us” of “our” obligations under this Policy.
Analysis
This condition affirms that neither bankruptcy or insolvency of the insured or the estate of the insured will relieve the insurer of its obligations under the policy.
C. Cancellation And Nonrenewal
1. Cancellation
a. The “named insured” shown in the Declarations may cancel this Policy by mailing or delivering to “us” advance written notice of the cancellation.
b. “We” may cancel this Policy by mailing or delivering to the “named insured” written notice of cancellation at least:
(1) 10 days before the effective date of cancellation if “we” cancel for nonpayment of premium; or
(2) 60 days before the effective date of cancellation if “we” cancel for any other reason.
c. “We” will mail or deliver “our” notice to the “named insured's” last mailing address known to “us”.
d. Notice of cancellation will state the effective date of cancellation. The “policy period” will end on that date.
e. If this Policy is cancelled, “we” will send the “named insured” any premium refund due. If “we” cancel, the refund will be pro rata. If the “named insured” cancels, the refund may be less than pro rata. The cancellation will be effective even if “we” have not made or offered a refund.
f. If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
Either insured or insurer may cancel the policy by giving the other party advance written notice. That notice may be mailed or delivered directly to the other party. If the insurer mails notice, proof of mailing is proof of notice. If the insurer cancels, it must give at least 10 days' notice when the cause is nonpayment of premium, and sixty days for cancellation on any other grounds. The insured receives a pro-rata premium refund when the policy is cancelled by the insurer. If the insured cancels, the cancellation condition provides that any premium refund “may be less than pro rata”, language which allows the insurer to use a short rate table to set the amount of premium refund on a policy cancelled by the insured. Cancellation is effective even if the insurer has not made or offered a refund. It is typical for most states to have their own regulations regarding cancellations and non-renewals which would be amended by an endorsement to the policy.
2. Nonrenewal
If “we” decide not to renew this Policy, “we” will mail or deliver to the “named insured” written notice of the nonrenewal not less than 30 days before the expiration date.
If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
This policy requires written notice of the policy nonrenewal by the insurer to be either mailed or delivered to the named insured shown in the declarations no later than 30 days prior to the expiration of the policy. If the notice is mailed, proof of mailing will be considered sufficient proof of notice. It is typical for most states to have their own regulations regarding cancellation and nonrenewal which would be amended by an endorsement to the policy.
D. Changes
This Policy and “application” contain all the agreements between “you” and “us” concerning the insurance afforded. This Policy's terms can be amended or waived only by endorsement issued by “us” and made a part of this Policy.
Analysis
The “Changes” condition stipulates that any changes in the terms of the policy can be made only by agreement between the insured and the company, and by endorsement issued by the insurer. If the insured wishes to make changes, the request must be made by the named insured.
E. Changes in Exposure
1. Merger Or Acquisition Of Named Insured
If during the “policy period”:
a. The “named insured” merges into or consolidates with another entity such that the “named insured” is not the surviving entity; or
b. Another entity or person or group of entities and/or persons acting in concert, acquires securities or voting rights which result in ownership or voting control by the other entities or persons of more than 50% of the outstanding securities representing the present right to vote for the election of directors of the “named insured”;
then coverage under this policy will continue until the end of the “policy period”, or the expiration of a Run-Off Coverage Period shown in the Declarations, if purchased, but only with respect to “claims” arising out of “wrongful acts” which occurred on or after the retroactive date and prior to such merger, consolidation, or acquisition.
The full annual premium for the “policy period” will be deemed fully earned immediately upon the occurrence of such merger, consolidation or acquisition of the “named insured”. The “named insured” must give written notice of such merger, consolidation or acquisition to “us” within 60 days of such merger, consolidation or acquisition.
2. Acquisition By The Named Insured Or Creation Of Another Entity
If during the “policy period” the “organization” acquires:
a. Securities or voting rights in another entity or creates another entity resulting in a “subsidiary”; or
a. Any entity by merger into or consolidation with the “named insured” or an existing “subsidiary”;
the “named insured” must:
(1) Give “us” written notice of the acquisition or creation of such entity within 60 days after the effective date of such action; and
(2) Pay any additional premium that “we” may require if “we” agree in writing to add such entity as a “subsidiary”.
The newly acquired or created entity will then be covered under this Policy, but only with respect to “wrongful acts” which occurred after the effective date of such acquisition or creation.
3. Cessation of Subsidiaries
If an entity ceases to be a “subsidiary” during the “policy period”, then coverage for such former “subsidiary” will continue until the end of the “policy period” or the expiration of a Run-Off Coverage Period, if purchased, but only for “claims” arising out of “wrongful acts” occurring on or after the retroactive date and prior to the date it ceased to qualify as a “subsidiary”, subject to all other terms and conditions of this Policy.
Analysis
This condition affirms the impact on coverage if the insured acquires another entity or any other acquisition by the named insured. If the insured organization acquires another entity or creates another entity, no coverage of wrongful acts will be provided until after the date of acquisition or creation, and the insured is required to notify the insurer in writing of such merger, creation, or acquisition within 60 days of the date of the merger, creation, or acquisition. Coverage is also precluded for wrongful actions of subsidiaries that occur after an organization stops being a subsidiary during the policy period.
F. Legal Action Against Us
No person or entity has a right under this Policy:
1. To join “us” as a party or otherwise bring “us” into a suit asking for “damages” from an “insured”; or
2. To sue “us” under this Policy unless all of its terms have been fully complied with.
A person or entity may sue “us” to recover on an agreed settlement or on a final judgment against an “insured”, but “we” will not be liable for “damages” that are not payable under the terms of this Policy or that are in excess of the applicable Limit Of Liability shown in the Declarations. An agreed settlement means a settlement and release of liability signed by “us”, the “insured” and the claimant or the claimant's legal representative.
Analysis
This condition bars anyone from bringing suit against the insurer unless all of the terms of the policy have been fully complied with. When compliance with the provisions has been met, any party to the policy may bring an action against the insurer to enforce the contract.
G. Other Insurance
Such insurance as is provided by this Policy shall apply only as excess over any other valid and collectible insurance, unless such other insurance is expressly written to be excess over the Limit of Liability provided by this Policy.
Analysis
This condition sets forth whether this Policy is primary or excess when it is compared to other policies that could potentially respond to a claim. This policy will always be excess over any other available policy providing the same coverage, unless the policy is written to be an excess limits policy over this policy.
H. Reporting, Notice And Duties In The Event Of A Claim Or A Wrongful Act That May Result In A Claim.
1. “You” must give “us” written notice of any “claim” made against “you” within the “policy period” as soon as practicable, but in no event later than 60 days after the end of the “policy period”. If an Extended Reporting Period or Run-Off Coverage Period applies, “you” must provide “us” written notice of any “claim” made against “you” within the applicable Extended Reporting Period or Run-Off Coverage Period as soon as practicable, but in no event later than 60 days after the end of the applicable Extended Reporting Period or Run-Off Coverage Period.
If “you” receive a “claim”, “you” must also:
a. Immediately record the specifics of the “claim” and the date received;
b. Immediately send “us” copies of any demands, notices, summonses or legal papers received in connection with the “claim”;
c. Authorize “us” to obtain records and other information;
d. Cooperate with “us” in the investigation, defense or settlement of the “claim”; and
e. Assist “us”, upon “our” request, in the enforcement of any right against any person or entity which may be liable to “you” because of a “wrongful act” to which this insurance may also apply.
If during the “policy period” “you” become aware of any circumstances potentially involving a “wrongful act” that could reasonably be expected to give rise to a “claim”, “you” must provide “us” with written notice of the circumstances as soon as practicable, but no later than the end of the “policy period”. If “you” become aware of any circumstances during any applicable Extended Reporting Period or Run-Off Coverage Period, “you” must provide “us” with written notice of the circumstances as soon as practicable, but no later than the end of any applicable Extended Reporting Period or Run-Off Coverage Period.
Such notice of any circumstances potentially involving a “wrongful act” must provide:
a. A description, including all relevant dates;
b. The names of the persons involved, including names of the potential claimants;
c. Particulars as to the reasons for anticipating a “claim” which may result;
d. The nature of the alleged or potential “damages”; and
e. The circumstances by which the “insured” first became aware of the potential “wrongful act”.
If a “claim” develops from the same circumstances or from any “interrelated wrongful act”, then “we” will treat that “claim” as if it had first been made against “you” on the date “you” notified “us” of it as a potential “claim”. “We” will do so even if that “claim” is first made against “you” after the “policy period” or applicable Extended Reporting Period or purchased Run-Off Coverage Period has ended.
3. All notifications made to “us” under this paragraph must either be in writing and submitted to the designated mailing address or sent to the e-mail address identified in the Declarations and should reference the Policy Number.
4. No “insured” will, except at that “insured's” own cost, voluntarily make a payment, assume any obligation or incur any expense without “our” written consent.
Analysis
The insured has many obligations in reporting and notifying the insurer of claims, those obligations are depicted in this section. They include giving notice of circumstances surrounding a potentially wrongful act, including a description of the incident, names of relevant parties, the details as to why a claim is anticipated, etc. This section also depicts an insured's obligations upon receiving a claim or becoming aware of circumstances or conduct that could reasonably be expected to give rise to a claim. These obligations must be complied with explicitly for coverage to apply.
I. Representations And Severability Of The Application
1. Representations
By accepting this Policy, of which the “application“ is a part, “you” agree that:
a. The statements in the Declarations and “application” are accurate and complete;
b. Those statements are based upon representations “you” made to “us”; and
c. “We” have issued this Policy in reliance upon “your” representations.
2. Severability Of The Application
The “application” shall be considered as a separate “application” by each “insured person”. With respect to the “application”, no knowledge possessed by an “insured person” shall be imputed to any other “insured person”. However, if “we” learn that any of the representations or materials were untrue, inaccurate or misleading in any material respect, then “we” are entitled to treat this Policy as if it had never existed with respect to:
a. Any “insured person” who knew of such misrepresentations if such individual was aware that the “application” included the misrepresentations if such individual was aware that the “application” included the misrepresentations; or
b. Any “organization” if any past or present chief financial officer, chief executive officer, in-house general counsel, managing partner or any person in any equivalent position of the foregoing, regardless of title, knew of such misrepresentations, even if such individual was not aware that the “application” included the misrepresentations.
Analysis
This condition reiterates that the insurer is issuing the policy based on the insured agreeing that statements in the Declarations and in the Application are accurate, complete, and based on representations made to the insurer. The application is considered to be separate for each insured person, no knowledge is to be imputed between insured persons. This condition also states that the policy may be voided against any insured who has knowledge of misrepresentations within the application and if such misrepresented information is known to the officers of an organization, it shall be imputed to the organization itself.
J. Subrogation
With respect to any payments made under this Policy on behalf of any “insured”, “we” shall be subrogated to “your” rights of recovery to the extent of those payments. “You” shall execute all papers required and shall do everything necessary to secure and preserve such rights, including the execution of such documents necessary to enable “us” to bring suit in “your” name.
Analysis
This condition states that when an insurer has made payment for a loss it assumes the insured's right to collect damages from another party who may ultimately be responsible for the loss, and that the insured must provide assistance to the insurer in this effort by complying with the terms of this condition.
K. Territory
Where legally permissible, this insurance applies to “claims” made or “wrongful acts” that take place anywhere in the world.
Analysis
This condition is self-explanatory, and states that this policy applies to wrongful acts or claims made anywhere in the world, where legally permissible.
Extended Reporting Periods and Run-Off Coverage Period
A. Extended Reporting Periods
This Policy provides a Basic Extended Reporting Period without an additional that starts at the end of the “policy period” and lasts for 60 days if this Policy is cancelled, other than for failure to pay premium, or not renewed by “us” or the “named insured”.
The “named insured” will have the right to purchase an Additional Extended Reporting Period for the period of time and at the percentage of the expiring premium as stated in the Declarations if this Policy is cancelled, other than for failure to pay premium, or not renewed by “us” or the “named insured”. If the Additional Extended Reporting Period is purchased, it will start when the Basic Extended Reporting Period ends.
The Basic or Additional Extended Reporting Period will apply only to “claims” that:
1. Are first made against “you” and reported to “us” during the applicable Extended Reporting Period; and
2. Arise from “wrongful acts” occurring on or after the Retroactive Date shown in the Declarations, but prior to the expiration date of the Policy Period.
B. Run-Off Coverage Period
The “named insured” will have the right to purchase a Run-Off Coverage Period for the requested period which shall not exceed six years, in the event of the merger, consolidation or acquisition of the “named insured” or cessation of a “subsidiary”.
1. In the event of a merger, consolidation or acquisition of the “named insured”, the Run-Off Coverage Period will apply only to “claims” that:
a. Are first made against “you” and reported to “us” during the Run-Off Coverage Period; and
b. Arise from “wrongful acts” occurring on or after the retroactive date and prior to the merger, consolidation or acquisition of the “named insured”.
2. In the event of a cessation of a “subsidiary”, the Run-Off Coverage Period will apply only to “claims” that:
a. Are first made against the “subsidiary” or any “insured persons” of such “subsidiary” and reported to “us” during the Run-Off Coverage Period; and
b. Arise from “wrongful acts” occurring on or after the retroactive date and prior to the cessation of such “subsidiary”.
If Run-Off Coverage is purchased in the event of the cessation of a “subsidiary” and a “claim” is made that is also covered by another policy issued by “us” or a related company, the maximum “we” will pay under both policies combined shall not be greater than the Limit of Liability available under either policy, whichever is greater.
Notice of election of the Additional Extended Reporting Period and the Run-Off Coverage Period and full payment of any applicable additional premiums must be received by “us” within 30 days after the expiration of the “policy period”, along with any premium or retention “you” owe for coverage provided under this Policy, otherwise any right to purchase an Additional Extended Reporting Period or Run-Off Coverage Period will lapse at that time. Provided the additional premium and any amount owned are paid in full, the Additional Extended Reporting Period and Run-Off Coverage Period are non-cancellable and their additional premiums will be fully earned at the inception of the Additional Extended Reporting Period or the Run-Off Coverage Period.
There is no reinstatement of or separate or additional Limit of Liability for any Extended Reporting Period or Run-Off Coverage Period. The Limit of Liability available during any purchased Additional Extended Reporting Period or Run-Off Coverage Period shall be the remaining amount of the Limit of Liability available at the time this Policy was cancelled or non-renewed. Any applicable Extended Reporting Period or Run-Off Coverage Period does not apply to “claims” that are covered under any subsequent insurance “you” purchase, or that would be covered but for the exhaustion of the amount of insurance applicable to such “claims”.
Analysis
This policy includes a 60-day basic extended reporting period, beginning at the end of the policy period. For example, the insured purchases a policy effective January 1, 2016 to January 1, 2017. A wrongful act occurs on December 1, 2016. Because of the extended reporting period, the insured can report the loss up to March 2, 2017 and still have coverage for that loss.
Also during that 60 day period, there is generally an option to purchase an additional extended reporting period for a precise number of years under certain conditions for an additional period. In order to take advantage of the offer of an extended reporting period, the premium for the extended reporting period plus all outstanding premiums and fees must be paid upfront.
A run-off coverage period is also available as an option to purchase in the event of a merger, consolidation or acquisition of the named insured or the cessation of a subsidiary. There is no reinstatement of or separate or additional Limit of Liability for any extended reporting period or run-off coverage period. Run-off periods are similar to extended reporting provisions, with some minor differences.
Extended reporting periods generally are only available in one year terms, while Run-Off periods can be written for multiple year terms up to six years. Extended reporting periods are generally purchased when the insured changes from one insurer to another, while run-offs are used when one insured is acquired by joining another company by merger. Coverage for run-off periods is important in mergers because it protects a company against a prior action made against the acquired company after it has been acquired. For example, consider a policy written with a term between January 1, 2016 and January 1, 2017, with a 6-year runoff provision. In this situation, coverage will apply under the runoff provision for all claims that are a result of wrongful acts committed between January 1, 2016 and January 1, 2017 (the policy period) that are made to the insured and reported to the insurer between January 1, 2017 and January 1, 2023 (the 6 year run-off period). So a loss that occurs in November 2016 can be reported in April of 2020 and the insured will still be covered for that loss.
Definitions
A. “Application” means all signed “applications” for this Policy, including any attachments, addenda and other materials submitted in conjunction with such signed “applications”.
B. “Claim” means any of the following received by an “insured”:
1. A written demand for monetary or nonmonetary relief, including injunctive relief
2. A civil proceeding commenced by the receipt of a complaint or similar pleading;
3. A written request for mediation or demand for arbitration; or
4. A written request to toll or waive a statute of limitations related to a potential “claim” in the preceding Paragraphs 1.-3
C. “Damages” means the following that “you” are legally obligated to pay:
1. Compensatory awards or judgments, including prejudgment and post-judgment interest;
2. Monetary settlements; or
3. Punitive, exemplary and multiple “damages” where insurable by the applicable law which most favors coverage for such damages.
“Damages” shall not include:
1. Taxes, fines, or penalties imposed by law, other than punitive, exemplary or multiple damages that are considered insurable by the applicable law which most favors coverage for such damages;
2. Liquidated damages;
3. Any amounts that are uninsurable under the law pursuant to which this Policy shall be construed;
4. Restitution, disgorgement, unjust enrichment or any profits or advantage “you” were not legally entitled to;
5. The cost to comply with any order or agreement to provide any equitable relief including injunctive relief; or
6. “Your” cost to provide, correct, re-perform or complete any “professional services”.
D. “Defense Costs” means all reasonable costs, charges, fees (including attorney's fees and experts' fees) and expenses incurred in investigating, defending, opposing or appealing any “claim” and the premium for appeal, attachment, or similar bonds. “Defense costs” shall not include any salaries, wages, fees or benefits of “insured persons”.
E. “Discrimination” means any violation of a person's civil rights with respect to race, color, national origin, religion, gender, gender identity, marital status, age, sexual orientation or preference, physical or mental condition, or any other protected classes or characteristic established by any federal, state or local statutes, rules or regulations.
Analysis
An application under this policy has to be signed and can include attachments and other materials.
A claim is a written demand for monetary damages or non-monetary relief, a civil complaint or a formal administrative or regulatory proceeding against any insured for a wrongful act. A claim also includes a written request received by an insured to toll or waive a statute of limitations related to a potential claim in connection with the rendering of or failure to render professional services, a defined term.
Damages include compensatory awards or judgments including pre-judgment and post judgment interest; monetary settlements; or punitive, exemplary and multiple damages where insurable. Damages does not include equitable relief, restitution, liquidated damages, disgorgement, amounts that are uninsurable, taxes, fines or penalties and the cost to provide, correct, re-perform or complete any professional services.
Defense Costs are simply what the insurer spends to defend the insured, and are specifically listed in the definition.
Discrimination means a violation of a person's civil rights with respect to any protected class or characteristic established by any federal, state, or local statutes, rules or regulations. This includes sexual orientation or preference along with the standard classes like race, color, national origin, religion, and gender.
F. “Electronic data” means digital information, facts, images or sounds stored as or on, created or used on, or transmitted to or from computer software, including systems and application software on electronic storage devices, including drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
G. “Employee” means any natural person whose labor or service is, was or will be engaged and directed by an “organization”, and includes part-time, seasonal, leased or temporary workers, interns or volunteers, but does not include independent contractors.
H. “Fungi” means any type or form of fungus, including mold or mildew and any mycotoxins, spores, scents or by-products produced or released by fungi.
I. “Insured”, “you” or “your” means the “organization” and “insured person”.
J. “Insured person” means any:
1. “Employee”; or
2. Partner, director, officer or board member, or equivalent position of the
named insured” or any “subsidiary”;
but only while in the course of their performance of “professional services” on behalf of, or at the direction of the “organization”.
Analysis
Electronic Data is digital information, images, or sounds stored on computer software. This definition includes drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
An employee is defined as including leased workers and temporary workers but not independent contractors.
Fungi means any type of fungus, mold or mildew.
The insured, you and your is specific in the policy and means the organization and insured person (both defined terms).
Insured person can mean any employee, partner, director, officer, or board member, or equivalent position of the named insured or any subsidiary. The above listed people are only considered “insured persons” while in the course of their performance of professional services on behalf of or at the direction of the organization.
K. “Interrelated wrongful act” means all causally connected “wrongful acts” arising out of the same or substantially the same facts, circumstances, or allegations which are the subject of or the basis for any “claim”.
L. “Loss” means any “damages” and “defense costs”.
M. “Named insured” means the individual or entity specified in the Declarations.
N. “Organization” means:
1. The “named insured” and any “subsidiary”: and
2. Any entity that is a debtor in possession under United States bankruptcy law or that is the equivalent of a debtor in possession under the law of any other country.
O. “Policy Period” means the period of time from the inception date of the Policy shown in the Declarations or its earlier cancellation or termination date. In no event will the “policy period” continue past the effective date of cancellation or termination of this Policy.
Analysis
An interrelated wrongful act means all causally connected wrongful acts arising out of the same or substantially the same facts, circumstance, or allegations that are the subject of or the basis of any claim or lawsuit. This relates to the limits of insurance and the deductible information so as to clarify just how many wrongful acts are to be included in one claim against the insured. This is similar to the one occurrence versus multiple occurrences dispute that sometimes arises in the midst of general liability policy claims.
Loss is self-explanatory and simply means damages and defense costs.
Named insured means the individual or entity specified in the Declarations.
Organization is the named insured, and any subsidiary or debtor in possession under United States Bankruptcy law, or the equivalent of the US Bankruptcy law in any other country.
The definition of policy period is standard and is the period of time between inception date and expiration date, or an earlier cancellation or termination date.
P. “Pollutants” means any solid, liquid, gaseous or thermal irritant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Q. “Professional Services” means only those services specified in the Declarations that were performed by “you” for others.
R. “Subsidiary” means any entity in which:
1. More than 50% of the outstanding securities or voting rights representing the present right to vote for the election of directors or an equivalent position is owned, in any combination, by the “organization”; or
2. The “organization” has the right, pursuant to a written contract or the bylaws, charter, operating agreement or similar documents of an entity, including a limited liability company or joint venture, to elect, appoint, or designate a majority of the board of directors or equivalent executives of such entity.
S. “We”, “us” and “our” means the insurance company identified in the Declarations as issuing this Policy.
T. “Wrongful act” means any actual or alleged act, error, misstatement, misleading statement, omission, neglect, breach of duty committed, attempted, or allegedly committed or attempted solely in the performance of or the failure to perform “professional services”.
Analysis
The definitions of pollutants and professional services are standard.
Subsidiary means any entity in which more than fifty percent of the outstanding securities or voting rights representing the present right to vote for the election of directors, or equivalent position, is owned, in any combination by the organization where the organization has the right to elect, appoint, or designate a majority of the board of directors or equivalent executives to such organization by written agreement or by-laws, charter, operating agreement or similar documents.
We, us, and our is a standard definition and all three words refer directly to the insurance company identified on the Declarations as issuing the policy in question.
A wrongful act by the insured is the basis of the necessity of the coverage provided in this form, MI 00 01. The term means any actual or alleged error or omission committed or allegedly committed by an insured. This error or omission must arise out of the rendering or failure to render professional services (as defined) and must result in actual or alleged damages.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.