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Professional Liability Insurance

Professional Liability Insurance

Heartland Credit Union has partnered with Newtek Insurance Agency, LLC to provide you with the right insurance coverage at the right prices. Newtek offers insurance products in all fifty states.  Our programs are underwritten by multiple  carriers who have been afforded A.M. Best “A” ratings. Newtek’s licensed agents, are available to provide options to protect your business at affordable costs.


Why You Need Professional Liability Insurance

Professional Liability should be considered for any individual or business that provides professional advice or services. A General liability Policy normally excludes protection for the failure to render or improperly rendering professional services. Professional liability is also referred to as Errors and Omissions Insurance. For some types of professions, insurance carriers may offer a package policy that provides both Professional Liability and General Liability on one policy which normally is more cost efficient.

Professional Liability (E&O) Insurance

E&O should be considered for anyone who gives advice, recommendations, or provide a professional service to others. The type of services are varied but include consultants, software developers, network enginers, architects and engineers, lawyers, Doctors, Notary Publics, publishers, accountants, insurance agent and other professions. E&O policies are designed to cover the defense costs and ultimately the final judgment if the business owner is found to be negligent.

A case for Directors and Officers Insurance

The Directors of a Non Profit, public or private company can be held liable for their decisions.  A suit may come from a number of sources including employs, shareholders, investors, competitors, suppliers, customers and lenders.  Recent studies indicate that 39% of private companies with 25 employees or more experienced a D&O suit in the last 5 years with at an average cost of $310,000.

A D&O policy provides financial protection to the Directors and Officers of the company if they are sued in conjunctions with the performance of their duties with the company.  D&O claims come in the form of alleged financial damage and neither the traditional General Liability nor a professional liability policy provides such protection, so a Directors and Officers Policy is the only back stop for this type of claim or suit.

The policy can also include Employment Practices Liability and Fiduciary Liability. Employment practices accounts for about 50% of all D&O claims especially in hard economic times with layoffs and downsizing the norm.  The policy will provide defense, even if the allegations are without merit.

Consider the following examples of real life claims:

  1. A private company considered acquiring a smaller competitor.  After months of due diligence the firm decides not to go through with the purchase for a number of valid reasons.  Several months later the Company officers are sued under the theory that the due diligence process was simply a ruse to gain competitive advantage.  The cost ultimately exceeded $900,000.
  2. Two weeks after being hired away from a competitor, a new employee was fired by the Company President who decided he made a bad hiring decision.  The former employee filed suit alleging that during the hiring process the President misrepresented the position.  The jury took less than 3 hours to find the President personally liable.
  3. The CEO of a privately held company gave stock bonuses to two senior managers that over time gave each manage 10% equity in the company.  Upon the death of the CEO, his spouse inherited the company and the relationship with the two managers deteriorated and they left the firm.  The firm then lost major clients and the two managers filed suits related to the devaluation of their stock.
  4. The trustees of a trade association decided to expand their activities into areas that were not explicitly envisioned by the founders. Their state’s attorney general brought an action against them alleging misuse of funds and property for operating outside their charter, even though no third party had raised a complaint.
  5. A local chamber of commerce published a quarterly newsletter. The newsletter included a tourism section, promoting places of interest, attractions, restaurants, etc. A new restaurant had recently approached the chamber with a request to advertise in the upcoming issue The chamber agreed and accepted a minimal advertising fee from the restaurant. Upon release of the next issue, it was discovered that the Executive Director never expedited the restaurant request and actually kept the money. The restaurant in turn sued the chamber for breach of fiduciary duty, breach of contract and interference with economic interests.
  6. A donor made a large contribution to a foundation to aid students in need of tuition. The board instead voted to expand their headquarters and commit a portion of the donation to the building fund. The donor filed suit, alleging misappropriation of funds. Damages included return of the full contribution plus interest. As some of the money was already spent, the foundation was financially unable to return.

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