Professional liability claim management is a unique area of insurance claim responsibilities. Indeed, there are as many ways to supervise, manage, and investigate professional liability claims as there are different lines of professional liability coverage. This article will address the key issues that are involved in the investigation and resolution of nonmedical and non-D&O claims under professional liability policies.
To the uninformed, "a claim is a claim is a claim." To some extent this is true. Any type of liability claim requires proof that the insured owed a duty to another person or entity, that the insured breached this duty, and that the breach was the proximate cause of quantitatively measurable damages suffered by the person or entity to whom the duty was owed. Thereafter, it becomes a matter of determining whether or not there are any defenses such as comparative or contributory negligence on the part of the claimant. Finally, there is the question of coverage-the issue of whether or not the policy will respond to the claim.
This simple analysis applies to claims under all liability coverage lines. In the professional liability arena, however, things are never simple. Often, the issue of liability in a complex real estate transaction, Securities and Exchange Commission (SEC) matter, or tax dispute is not as readily determinable as would be the case in a slip-and-fall or fender-bender claim. Moreover, damages as well as coverage under the policy may not be easy to evaluate in the absence of sophisticated, expert analysis. The issue of plaintiff culpability or the liability of other codefendants could cloud the situation, as well. Claims-made coverage issues may also complicate management decisions, and in the process, make reserving and coverage determination all the more complex. Finally, since most professional liability policies are written with so-called "diminishing limits provisions" (whereby defense expenditures reduce policy limits), this gives rise to a host of other thorny issues when developing a defense and settlement strategy for any given claim. In other words, yes, "a claim is a claim is a claim," but in professional liability insurance, the man-hours necessary to properly evaluate and conclude a professional liability claim are far more extensive than in other, more standardized, lines of insurance.
The following discussion consists of five sections. The first explores the common investigation and resolution issues that apply to nonmedical and non-D&O professional liability claims. The second addresses some specific areas that have particular relevance to certain individual professions. The third analyzes some of the claims-made coverage problems associated with professional liability claims. The fourth touches upon various coverage issues that may affect the handling of a claim against a professional. The discussion concludes with a look at the diminishing limits policy provision and examines its implications for the defense and settlement of professional liability claims.
Professional liability is a fluid arena. What may apply today can be changed tomorrow by a simple stroke of an appellate pen. It is therefore important to accept the fact that professional liability claim analysis is as complicated as are the individual professions themselves. This article will thus seem a bit generalized, which is its intent. Specific, substantive issues associated with a particular profession will not be explored except as examples, when necessary.
Frederick J. Fisher, JD, is the President of Fisher Consulting Group, Inc., a Professional Liability firm. Since his career began, Mr. Fisher focused on one vision: providing financial security to the client. The result was a successful 40 year career in Specialty Lines Insurance.
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