Ask an Expert - Liability Insurance
Ask A Professional Liability Insurance Expert By:
Gary Sutherland, CEO
North American Professional Liability Insurance Agency, LLC
5 Whittier Street, 4th Floor
Framingham, MA 01701
Phone: (866) 262-7542
Fax: (508) 656-1399
Email: GaryS@Naplia.com
Web: http://www.naplia.com
With approximately 20 years of insurance experience, Gary B. Sutherland founded North American Professional Liability Insurance Agency, LLP (NAPLIA) in 1998. NAPLIA has grown to be one of the leading writers of professional liability insurance specializing in financial professionals. Mr. Sutherland holds the prestigious designation of Certified Insurance Counselor (CIC), an honor attained by only 2% of all insurance brokers. He previously held the position of National Sales Manager for a leading provider of professional liability insurance. Mr. Sutherland’s expertise is well acknowledged and he regularly speaks at national conferences, including Fiduciary 360, CFDD and large accounting firms.
Q: What are the "typical" levels of professional liability coverage issued to investment advisors/consultants acting in a fiduciary capacity under ERISA? Are the coverage limits different for individual "investment advisor representatives" and the "registered investment advisor" firms they represent?
The majority of NAPLIA’s Investment Advisor clients carry a $1 million limit which should be adequate in most cases. However, it is important for advisors to evaluate their own business, including a full comprehension of their exposure. If the assets under management are larger than the typical practice, the exposure may warrant a $2 million limit. Again, evaluating exposure is the key. The E & O policies that we offer provide entity coverage. In other words, the entity as well as the employees and representatives working on behalf of the entity are covered at the policy limit. Many B-D polices provide coverage for only the representative. This is why it is important to determine who is listed in the policy as a “named insured.” |
Q: How do I know if my E&O insurance covers my acts as a fiduciary? Also, how do I know if it covers my firm, myself or both? Additionally, is it important for both to have coverage?
There is only one real way to know if your policy provides coverage as a fiduciary for your client’s ERISA plans. You must read the full policy, including the attached endorsements and the declarations page. A typical policy is divided into multiple sections. A few areas/sections critical for coverage determination are Definitions and Exclusions. The Definitions section discusses the professional services covered under a policy. It also discusses who the named insured is under the policy. Since claims can be made against both, it is important that coverage be provided for both the individual and the entity. As you might guess, the Exclusions section discusses the services that are excluded. Reading a policy can be difficult because the contract language often appears to be contradictory. Professional liability insurance is a specialty area, but a knowledgeable independent insurance broker should be able to assist you with analysis of the policy, the coverage intent and potential deficiencies. |
