Common Terms

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Professional Liability Insurance to the Power of 2

L Squared Insurance Agency LLC

Admitted carriers are protected by the state’s insurance funds in case of a financial default of the insurance carrier.   There are payment limits by the state fund and these are usually less than an insured’s Professional Liability limits.  Non-admitted carriers are not protected by these state funds.

Rating agency that provides information about the relative financial strength and claims paying ability of an insurer.

Most professional liability policies are Claims Made or Claims Made and Reported.  The insurance carrier that carries the current coverage is liable for the claim when the claim is reported, not when the act occurred.  Versus an occurrence policy where the insurance carrier that was on the risk when the act occurred is liability for the claim regardless of when it was reported.  The major importance of this is to continue to have coverage for Prior Acts in the future, an insured needs to continue to maintain a Claims Made Policy or have an Extended Reporting Period or Tail purchased to cover the acts in the past.

Limits the amount paid by the insured for deductible expenses to the amount shown no matter how many claims are initiated during the policy period.

With this option the insured only pays the deductible if there is an indemnity payment.

A sub-limit that will cover the costs of defending a claim without using the Limit of Liability.  Once this is exhausted generally the Limit of Liability is reduced to pay for any additional defense costs.

Insurance coverage that pays once the primary insurance is exhausted.  It is very important that the primary and excess policies have the same effective and expiration dates.

Defines what is not insured by this policy.  You need to read this section carefully as certain policies by exclude a common area of your practice.

Commonly referred to as Tail coverage, this provides coverage after a Claims Made Policy expires or is no longer in force for acts that occurred during the time a Claims Made Policy was in-force.  You generally have a right to purchase this coverage (within 30 to 60 days) whenever a policy is not renewed.  It does not provide any coverage for any future acts.

When one insurance carrier will not provide all of the needed insurance coverage.  Other carriers may be willing to provide Excess Insurance to provide the necessary limits.  A Following Form Policy uses the terms and conditions in the primary insurance policy to cover and settle losses.  This helps prevent uninsured insurance exposures that might result if the policy language between the underlying coverage and the Excess Insurance are different.