Hidden In Plain English: A Comparison Guide To E & O .
Hidden in Plain English:A Comparison Guide toE & O Policy LanguageBy Fredric W. Schultz, CPCU, ARMThe AIA Trust commissioned Fredric W. Schultz, CPCU, ARM and Chairman and Principal Consultant ofInsurance Buyers Council (IBC) to develop a detailed annotated version of the new CNA ProfessionalLiability policy which became effective in 2015, comparing the new CNA policy with five other insurancecarriers: Beazley, RLI, Travelers, Berkley and ACE. The overall goal was to provide guidance to AIAmembers about coverage differences between various insurer forms and about what one should look forwhen purchasing professional liability insurance policy. This was accomplished with the following twoobjectives in mind:1. Identify CNA form changes from the 10/2005 edition; and2. Compare key coverage terms and conditions between insurers’ forms.The forms used for comparison with the CNA form were as follows:1. Beazley - F00120 (08/09)2. RLI -RDP 101 (01/09)3. ACE-PF-14373 (07/03)4. Travelers– DPL-1001 (11/08)5. Berkley - BDP-0713001The major difficulty in comparing coverage between different insurance carriers is that there is nostandard form as a basis for insurers to start with when composing their policies. Policies are all verydifferent while proclaiming they provide the same protection. For example, some insurers put more coverageextensions into the professional liability policy whereas others may provide the same protection using two ormore separate policies. The problem with adding more protection into one policy is that the single policymay have only one aggregate limit applying to all coverages, essentially reducing the limits an architectmight have available with separate policies.One consistent provision on all the policies that were reviewed is that the insurance is written on a “claimsmade and reported” basis. This means that the claim must be made against the insured and reported to theinsurer generally within the policy term. In some of the policies, the reporting requirement is extended to 60or even 120 days. Communication with the insurer is critical in preserving the insured’s rights under theterms of the policy.The policies differ in many aspects including the actual insurance agreements. The new CNA form hastwo insurance agreements, one for Professional Liability and the second for Pollution Incident Liability.They have also added a new “supplemental insurance agreement” for “rectification expense.” The otherinsurer forms compared also include a Professional Liability insuring agreement and some have also addedseveral other insuring agreements for technology-based services, technology products, computer networksecurity, privacy liability, cyber liability, etc. The new CNA form is not as broad as many of its competitorsin providing coverage for “Cyber Liability” or “Technology Based Services”; however, CNA does offerPublished by the AIA Trust, TheAIATrust.com1
Cyber Liability via a separate policy or by endorsement.A new coverage in the CNA form is known as “rectification expense.” This involves an architect recognizingthat there may be a design defect which can be corrected or otherwise can be rectified prior to completion ofthe project. The architect must provide CNA with details of the action which can rectify the problem and theamount of expense involved. If the design defect can be corrected and CNA consents, then CNA willreimburse the architect up to the “rectification expense” limit provided by the policy. This is an unusualcoverage for a Professional Liability policy in that it provides for the payment of the potential claim before aclaim has actually been made.Pre-claims assistance is another unusual feature of CNA’s and the other policy forms reviewed for thisanalysis. The insurers will pay for all costs or expenses to its insured at the insurer’s sole discretion ininvestigating a circumstance that might lead to a claim.One of the new elements in the CNA policy is the addition of a “Knowledge Date”. It is similar to aretroactive date which is still in use by the other professional liability insurers. The new CNA form covers awrongful act provided that “on the knowledge date” none of the insured’s officers, directors, principals,partners or insurance managers knew of any act, error, omission or event that could reasonably be expectedto become the basis of a claim. Similar to a retroactive date, it is important that this date not be movedforward each year at renewal. The date used should be the same date the Professional Liability Policy wasfirst purchased from CNA.The definition of covered “Professional Services” is a critical item in a professional liability policy. CNA'sdefinition in the new form adds “Interior Designer”, “LEED Green Building Program Consultant” and“Technology Consultant”. Some of the terms used by other carriers include space planner, expert witness,project manager, construction or project consultant and environmental consultant. It is critical that thearchitect review the definition of “professional services” closely to make certain all of the firmfunctions are contemplated in the definition.The CNA form provides for certain credits on deductibles known as the Risk Mitigation Credit, and EarlyResolution Credit. If the insured architect complies with certain risk management protocols as described inthe policy, a deductible can be reduced by 50% up to 25,000. Similarly, if a claim can be resolved within180 days from the time it was reported to the insurer, the deductible can be reduced by 50% up to 10,000under the Early Resolution Credit. This Risk Mitigation Credit is exclusive to CNA but the Early ResolutionCredit in some form is available from the other insurers whose policies were reviewed.Regarding specific CNA form changes in the 2015 version, the following notable changes were identified:I. Coverage Expanded the Pollution Incident Liability coverage to include the following: liability that the Insured assumes from an insured client; a covered location; or a non-owned disposal site;Added new insuring agreement for rectification expenses.II. Supplementary PaymentsPublished by the AIA Trust, TheAIATrust.com2
Added crisis event expenses. This reimburses the Named Insured up to 50% of 30,000 per crisisevent, subject to a maximum reimbursement by the Insurer of 50,000 per policy year for all crisisevents.Increased the defendant reimbursement to 500 a day per person, subject to a maximum of 15,000per claim (was 300; 7,500 max).Increased the ADA, FHA and OSHA reimbursement from 25,000 to 35,000.Added disciplinary proceedings. This reimburses the Insured up 25,000 in the aggregate per policyyear.Added Dodd-Frank fees and expenses. This reimburses the Insured for legal fees and expenses up to 50,000 per policy year.III. Definitions – several new terms were added and amendments to existing terms were made. For example: Knowledge date is now a defined term.Insured is now a defined term.Professional services now includes interior designer and LEED green building program consultant.IV. Exclusions Unlawful Discrimination was added as an exclusion.V. Limits of Liability/Deductible Added Early Resolution Credit which reduces the deductible by 50%, up to 10,000 for resolutionreached from negotiation or mediation within a specified timeframe.VI. Conditions Participating Provision removedExtended reporting period provisions – Added: Death or disability ERP (VI. N. 3) and Nonpracticing ERP (VI. N. 4)From the comparison of the CNA form and the competitive forms listed above, the following guidelines toavoid ‘potential pitfalls’ are noted as follows:1. Compare insuring agreements. Several forms provided insuring agreements beyond ProfessionalLiability and Pollution Incident Liability. One of the broadest forms was Beazley which providescoverage for Technology Based Services, Technology Products, Computer Network Security,Multimedia and Advertising and Privacy Liability.2. Identify what is included in ‘professional services’. Some forms may be broader. For instance, BeazleyF00120 (08/09) also includes project manager, forensic consultant and construction or project consultant.3. Seek the broadest definition of Wrongful Act. The RLI -RDP 101 (01/09) ties to negligence whereas theCNA form does not.4. Seek defense coverage for alleged fraudulent, dishonest or criminal acts until adverse adjudication. TheCNA form does not include this provision. However, we found this in the RLI, Beazley and ACE forms.Published by the AIA Trust, TheAIATrust.com3
5. Understand the reporting requirements in the event of a circumstance or actual claim.6. Identify how prior acts coverage applies. Although the CNA form does not have a retroactive date likemany of the other forms, there is a knowledge date. Be mindful if this is an advancing knowledge datewhere at each policy renewal, the date is amended.7. Look for a ‘hammer clause’ which limits recovery to amount of first proposed settlement offer. TheCNA form did not contain this recovery limitation. However, 3 of 4 remaining forms did contain such aclause.In summary, the new CNA form is broader in most respects than the previous CNA form and the CNAchanges have improved the form which compares favorably with the others that were reviewed. The newpolicy is also slightly broader in certain respects and not as broad in other areas than the competition’s formsthat were reviewed. However, it should be noted that the forms reviewed were base forms withoutendorsements. Carriers can and will add endorsements to their policies which amend the terms. Thus, anothercarrier’s basic form plus endorsements may end up as a better product for a particular architect. Becausethese forms are not standard, each one plus endorsements must be reviewed closely when consideringoptions for professional liability insurance. An experienced insurance broker is critical in assisting anarchitect in reviewing and advising which carrier’s coverage is more appropriate.Published by the AIA Trust, TheAIATrust.com4
Professional Liability and Pollution Incident Liability InsurancePolicyPROFESSIONAL LIABILITY AND POLLUTION INCIDENT LIABILITY INSURANCE POLICYTHIS PROFESSIONAL LIABILITY AND POLLUTION INCIDENT LIABILITY INSURANCE POLICY IS WRITTEN ON A“CLAIMS-MADE AND REPORTED” BASIS AND APPLIES ONLY TO THOSE CLAIMS FIRST MADE AGAINST ANINSURED AND REPORTED TO THE INSURER IN ACCORDANCE WITH THE SECTION OF THE POLICY ENTITLEDCONDITIONS, THE CONDITION ENTITLED THE INSURED’S DUTIES IF THERE IS A CLAIM.Comment [JLD1]: 2005 FORM STATED‘YOUR’Comment [JLD2]: 2005 FORM STATED‘YOU’Comment [JLD3]: 2005 FORM STATED ‘US’Insurer means the Stock Insurance Company named on the Policy Declarations. Other key words and phrases thathave special meaning are displayed in bold face type. See the DEFINITIONS section of the Policy.Comment [JLD4]: Slight rewording from 2005form but same intentThe Insurer and the Insured agree as follows:Comment [JLD5]: Replaced terms ‘we’, ‘us’and ‘our’I.COVERAGEComment [JLD6]: Slight rewording from 2005form but same intentComment [JLD7]:COMPARISON:Beazley - F00120 (08/09) also providescoverage for: Technology Based Services Technology Products Computer Network Security Multimedia and Advertising Privacy LiabilityRLI -RDP 101 (01/09), ACE-PF-14373 (07/03)and Travelers– DPL-1001 (11/08) providespersonal injury coverage via the definition onWrongful ActTravelers– DPL-1001 (11/08) also includes‘Network and Information Security Offense’ inthe definition of Wrongful Act/Berkley – BDP0713001 –includes ‘Contractor’sPollution Liability’, ‘Cyber Liability’ and ‘Mediaand Personal Injury Liability’A. INSURING AGREEMENTSThe Insurer will pay all amounts in excess of the Deductible up to the Limit of Liability that the Insuredbecomes legally obligated to pay as a result of:1. Professional Liabilitya wrongful act that results in a claim anywhere in the world; orComment [JLD8]:Comparison – RLI , ACE, Travelers and Berkleyhave a retro; CNA does notComment [JLD9]:COMPARISON:ACE-PF-14373 (07/03) – limitation on where aclaim must be brought and maintained2. Pollution Incident Liabilitya pollution incident arising out of:d. a non-owned disposal site;Comment [JLD10]:COMPARISON:Beazley - F00120 (08/09) – must result fromProfessional Services or Contracting ServicesACE-PF-14373 (07/03) and Travelers-DPL1001 (11/08) – coverage not providedBerkley – BDP0713001 – must result fromProfessional Servicesthat results in a claim anywhere in the world;Comment [JLD11]: NEWa. the Insured’s activities or the activities of any person or entity for whom the Insured is liable;b. liability that the Insured assumes from an insured client;c. a covered location; orprovided that:Form No: CNA79034XX (09-2014)[FORMTYPE] ; Page: a of bUnderwriting Company: UWCOMP, UWADDR1 UWADDR2, UWCITY, UWSTATE UWZIP1 Copyright CNA All Rights Reserved.Policy No: POLSYM POLNUMPolicy Effective Date: PTEFFDATPolicy Page: x of y
Professional Liability and Pollution Incident Liability InsurancePolicyi.on the knowledge date, none of the Insured’s officers, directors, principals, partners, or insurancemanagers knew of any act, error, omission or event that could reasonably be expected to become thebasis of such claim; andii. such claim is first made against the Insured during the policy year and reported to the Insurer inaccordance with the Section of the Policy entitled CONDITIONS, the condition entitled The Insured’sDuties if There is a Claim. Except as set forth in the Section of the Policy entitled CONDITIONS, thecondition entitled The Insured’s Rights and Duties In the Event of a Circumstance, a claim isconsidered first made on the earlier of the Insured’s or the Insurer’s receipt of notice of the claim.B. SUPPLEMENTAL INSURING AGREEMENT – RECTIFICATION EXPENSEComment [JLD12]: NEWThe Insurer will reimburse the Named Insured for rectification expense in excess of the Deductible and upto the applicable design defect circumstance Limit of Liability, provided that:1. the Insured reports the design defect circumstance as soon as practicable during the policy year and inaccordance with the Section of the Policy entitled CONDITIONS, the condition entitled The Insured’sRights and Duties in the Event of a Circumstance; and2. the Insured demonstrates to the Insurer’s satisfaction that there is a design defect which is reasonablylikely to give rise to a claim covered under this Policy; and3. the Insured provides the Insurer with details of the action being contemplated by the Insured tominimize any potential liability arising out of such design defect circumstance and the amount ofrectification expense that is contemplated in connection with such action:a. as soon as practicable during the policy year or within sixty (60) days of the expiration of thepolicy year; andb. prior to incurring any rectification expense, except in the event of an emergency response; and4. prior to incurring any rectification expense, the Insurer consents in writing to such rectificationexpense (such consent not to be unreasonably withheld); and5. in the event a claim is made arising out of a design defect circumstance, then the Insurer may, at itssole discretion, cease paying further rectification expense associated with such design defectcircumstance; and6. such design defect circumstance does not arise out of the same or similar design defectcircumstances for which reimbursement expenses have been requested or paid.Such rectification expense will be reimbursed within ninety (90) days of the Insured’s submission of aproof of loss of such rectification expense.In the event that the Insurer and the Named Insured do not agree that the Insured’s proposedrectification expense is reasonable, then the Insured and the Insurer agree to submit such dispute to anyform of alternative dispute resolution acceptable to both parties. Should the Named Insured and theInsurer be unable to agree on the form of alternative dispute resolution, then such dispute shall besubmitted to binding arbitration administered by the American Arbitration Association under itsConstructionCommercial Arbitration Rules, and judgment on the award rendered by the arbitrators may beentered in any court having jurisdiction thereof.C. DEFENSE AND SETTLEMENT1. The Insurer has the right and duty to defend any claim against the Insured seeking amounts that arepayable under the terms of this Policy, even if any of the allegations of the claim are groundless, falseor fraudulent. The Insurer will designate or, at its option, approve counsel to defend the claim. TheInsurer is not obligated to defend any claim or pay any amounts after the applicable Limit of Liabilityhas been exhausted.Form No: CNA79034XX (09-2014)[FORMTYPE] ; Page: a of bUnderwriting Company: UWCOMP, UWADDR1 UWADDR2, UWCITY, UWSTATE UWZIP2 Copyright CNA All Rights Reserved.Policy No: POLSYM POLNUMPolicy Effective Date: PTEFFDATPolicy Page: x of yComment [JLD13]:COMPARISON:Not provided under the following carrier’s forms:RLI -RDP 101 (01/09)Beazley - F00120 (08/09)ACE-PF-14373 (07/03)Travelers DPL-1001 (11/08)Berkley BDP0713001
Professional Liability and Pollution Incident Liability InsurancePolicy2. The Insurer will not settle any claim without the informed consent of the first Named Insured.Comment [JLD14]:COMPARISON:RLI -RDP 101 (01/09) – hammer clause (50%)Beazley - F00120 (08/09) – hammer clauseACE-PF-14373 (07/03) – hammer clauseTravelers DPL-1001 (11/08) – no hammerclause; ‘such consent not to be unreasonablywithheld’Berkley BDP0713001 - hammer clause (50%)3. If a claim results in a punitive, exemplary, or multiplied damage award, the Insurer will pay suchaward, up to the applicable Limit of Liability, to the fullest extent permitted by law.Comment [JLD15]:COMPARISON:RLI -RDP 101 (01/09) – insurable by law underwhich the policy is construedBeazley - F00120 (08/09) – definition ofdamages specifically excluded multiplieddamages; punitive or exemplary damages areexcluded unless insurable by law which thepolicy is construedACE-PF-14373 (07/03) – definition of lossspecifically excluded multiplied damages;punitive or exemplary damages are excludedunless insurable under the ‘internal law of anyjurisdiction which has substantial relationship toInsureds, Insurer, this Policy or such Claim’Travelers DPL-1001 (11/08) - definition ofdamages specifically excluded multiplieddamages; punitive or exemplary damages areinsurable by the applicable law most favorableBerkley BDP0713001 – covered unlessuninsurable by lawII. SUPPLEMENTARY PAYMENTSExcept as noted in subparagraph D. below, payments made under this section are the Insurer’s costs, are notsubject to the Deductible, and are in addition to the Limit of Liability shown on the Declarations.Comment [JLD16]:COMPARISON:Berkley BDP0713001 also provides:Fee Dispute Mitigation Reimbursementssubject to sublimitPeer Review Reimbursement subject tosublimitCyber Security Breach ResponseReimbusementA. Crisis Event ExpensesComment [JLD17]: NEWThe Insurer will reimburse the Named Insured up to 50% of 30,000 per crisis event, subject to amaximum reimbursement by the Insurer of 50,000 per policy year for all crisis events, for crisis eventexpenses incurred as a result of a crisis event that occurs during the policy term.Comment [JLD18]:COMPARISON:Not found under the following forms:RLI -RDP 101 (01/09)ACE-PF-14373 (07/03)Berkley BDP0713001Provided in the following forms:Beazley - F00120 (08/09) 50% of 30,000; ‘inconnection with a Claim’ which is not as broadas ‘crisis event’Travelers DPL-1001 (11/08) - 10k each crisisevent; 30,000 all crisis eventsB. Pre-claims AssistanceUntil the date a claim is made, the Insurer may pay for all costs or expenses it incurs, at the Insurer’s solediscretion, as a result of investigating a circumstance that the Insured reports in accordance with theSection of the Policy entitled CONDITIONS, the condition entitled The Insured’s Rights and Duties in theEvent of a C
Liability policy which became effective in 2015, comparing the new CNA policy with five other insurance . wrongful act provided that “on the knowledge date” none of the insured’s officers, directors, principals, partners or insurance managers knew of any act, error, omission or event that could reasonably be expected . we found this .
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Using Plain Language in Law Firms By Edward Kerr M allesons Stephen Jaques has had a plain language policy since 1986. This paper de-scribes what we have done. First let me tell you a little about the firm. We are a large law firm even by world standards. We have
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Professional Ethics Division: Plain English guide to independence Purpose of this guide The purpose of the AICPA Plain English guide to independence is to help you understand independence requirements under the AICPA Code of Professional Conduct (the code) and, if applicable, other rulemaking and standard-setting bodies. Independence generally
