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Ever since the outset of the PFAC endorsed professional liability insurance program administered by Dominion Insurance Services, there has been an ongoing effort to improve the policy form for the benefit of policyholders. The policy wording as gone through a number of revisions, all of which have resulted in coverage enhancements for PFAC members insured under the program. Significant enhancements in the past resulted in an expanded definition of covered "Professional Services" as well as in narrowed coverage exclusions.
Dominion has recently completed yet another round of negotiations with underwriters at Lloyd's of London which has resulted in the additional policy form enhancements summarized below. Dominion can now offer this latest policy wording to insureds with March 1, 2009 inception dates or later. Existing policyholders will gain the benefit of this revised form as they renew their policies throughout the coming year.
Probably the most significant coverage enhancements in this round of changes relate to additional exceptions to the failure to insure ("S") and investment advice ("T") exclusions. As revised, these exclusions now read as follows:
The coverage under this Insurance does not apply to Damages or Claims Expenses incurred with respect: ...
- to any Claim arising out of the sale or purchase of insurance, or the failure to effect or maintain adequate levels or types of insurance;
This exclusion shall not, however, apply to any Claim brought against the Assured where such Claim arises out of:
- failure by the Assured to determine the scope or existence of insurance coverage for any estate property within 90-days of the Assured's first appointment as Fiduciary of such estate;
- failure by the Assured to identify property included within an estate after having conducted a diligent search and inventory of the estate within 90-days of the Assured's first appointment as Fiduciary of such estate; or
- a negligent clerical act, error or omission by or on behalf of the Assured in failing to make timely premium payments or otherwise respond to insurance carrier coverage requests to provide documentation and/or information.
- to any Claim arising out of the Assured's services involving investment advice;
This exclusion shall not, however, apply to any Claim brought against the Assured based upon the Assured's alleged negligent retention of a particular investment advisor so long as prior to any such Claim being made, the Assured had conducted a background check on such investment advisor and had instructed the advisor to develop and implement an investment plan based on the "prudent investor" strategy as set forth for in the Uniform Prudent Investor Act or other similar legislation.
With respect to an Assured's alleged failure to insure estate assets, the policy now provides a 90-day window from the date the fiduciary is first appointed within which to conduct an inventory of the assets of the estate. Such an inventory should normally include a determination of what coverage exists and whether the level of coverage is adequate for the exposure. In addition, assets which remain uninsured because they were not discoverable upon a diligent search by the fiduciary are also exempted from exclusion under the policy. Thus, the new policy form addresses two of the coverage concerns regarding failure to insure which PFAC members have raised most frequently with Dominion personnel.
Exclusion T, which relates to investment advice, has also been an area of concern. Dominion and Lloyd's have addressed these concerns by adding an exception to this exclusion which specifically creates a "prudent investor" strategy safe haven for insureds.
Another significant improvement in the policy form is found in the "other insurance" clause, which now reads as follows:
This insurance shall apply in excess of any other valid and collectible insurance available to any Assured, unless such other insurance is a surety bond or is written only as specific excess insurance over the Limit of Liability of this Policy.
This provision now makes an express exception for any "surety bond" issued to the Assured. Thus, if a claim is payable under both a court, probate or other type of surety bond as well as under the professional liability insurance, the E&O coverage will apply without taking into consideration any amounts paid by the surety company. This is important because, Assureds are required to reimburse the surety company 100% of any payments made under a bond. This change protects Assureds against any argument that because a surety payment is made, the E&O carrier need not make any payments with respect to the loss.
The new policy form also now includes the following express definitions which serve to provide greater clarity as to the scope of coverage for professional services:
"Professional Services" means services provided by an Assured to others for a fee on behalf of the Named Assured in any of the following capacities:
- Fiduciary
- Care Manager
- Daily Money Manager
- Bookkeeper
"Bookkeeper" means one who performs the mechanical recording of debits and credits or the summarizing of financial information for others for a fee.
"Care Manager" means one who provides the following services to others for a fee:
- coordinating assistance from paid service providers and/or unpaid help from family and friends to enable individuals with functional limitations to obtain the highest level of independence consistent with their capacity and preferences for care;
- face-to-face interviewing of individuals with functional limitations;
- assessment of functional limitations;
- care plan development for individuals with functional limitations;
- administrative and clerical aspects of care plan implementation and monitoring of individuals with functional limitations.
The services performed by a Care Manager do not include:
- providing actual health care services directly; or
- performing any services in any trade, business or profession other than a Care Manager, including without limitation activities as a nurse or other health care provider.
"Daily Money Manager" means one who provides any of the following services to others for a fee.
- paying bills;
- reconciling accounts;
- making bank deposits
- balancing check books;
- preparing checks for signature;
- organizing or reviewing incoming correspondence and/or other miscellaneous documents;
- organizing tax records or other similar financial documents;
- consultation or training in connection with pre-packaged financial software; or
- tracking/monitoring payments to creditors, insurance companies or medical providers.
"Fiduciary" means an Assured's capacity as:
- an executor or estate administrator;
- a bankruptcy administrator;
- a guardian or conservator;
- a representative payee;
- a receiver;
- an agent or attorney in fact, serving alone without any co-agent, under a written power of attorney for the person or estate of a natural person, not a commercial or charitable entity; or
- a trustee, serving alone without any co-trustee, or trust administrator under trusts created by written trust agreement or court order with respect to the estate of natural persons, not commercial or charitable entities (although trust assets may include ownership interests in such entities).
Fiduciary does not mean an Assured's capacity, nor activities as a lawyer, accountant, property manager, nurse or other health care provider, securities broker, mortgage banker, mortgage broker, independent third party escrow agent, real estate and/or construction advisor, real estate and/or property appraiser, real estate and/or property developer, insurance agent or insurance broker, or activities involving property syndication, real estate investment trusts, limited partnerships or similar investments.
Whenever the singular form of a word is used herein, the same shall include the plural when required by the context.
Additional changes made to the policy wording are more cosmetic in nature to improve the readability of the form and better highlight defined terms. PFAC members should feel free to direct any questions they may have about this new form to Dominion staff who may be contacted toll-free at 888.313.9977.
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