You’re working on an IT project for a client, and something goes terribly wrong. Your client isn’t happy, and you know there’s a good chance that you’ll take the blame for a big financial loss. Whether you actually get sued for an on-the-job mistake or are just on the receiving end of an angry confrontation with your client, you’re very relieved that you bought that professional liability insurance policy.
But do you know how to use it? What’s the right time to report a claim, and what can you expect once you do? While your own policy’s language will define exactly what qualifies as a covered claim, as well as what your responsibilities may be, there are some things to keep in mind when you’ve got a disgruntled client on your hands. First among them is determining whether or not you’ve actually got a covered claim.
Is My Claim Covered?
In general, covered professional liability claims include any demands you receive for money or services to compensate your client for an alleged error or omission in the provision of your professional services.
These types of demands often take the form of a legal action, such as a summons for a lawsuit or notification of the start of arbitration proceedings against you. But a claim could also come in the form of a letter demanding money from you, or even a verbal threat that you’re being held financially responsible for damages allegedly caused by your professional services.
Timely reporting is critical. If you’re not sure whether an actual claim has been made against you, don’t take any chances. Report it to your insurance carrier in writing immediately, and let them determine if coverage applies.
Even if you’ve just made a costly mistake on the job and only think a lawsuit is likely, it may be a good idea to let your carrier know ahead of time. In fact, your policy may actually require you to do so. If you get a demand for damages and waited too long to tell your insurer, the carrier could claim that the delay jeopardized its ability to defend you or settle, and could deny coverage.
Keep in mind that because most professional liability insurance policies are written on a “claims made” basis, your claim will be covered only if your policy is active at the time the claim is made as well as at the time that the alleged negligent incident or omission actually took place, also known as the date of loss.
Do’s and Don’t’s for Professional Liability Claims
When you report your claim, you’ll need to use your insurer’s claim form and provide copies of all related documents, along with a brief description of the work you performed for the client and any other specific information your insurance carrier asks for. Your claim will be assigned to a claims professional who will be your primary contact for case management. This person will review your coverage and limitations, contact you to get specifics about the case, let you know if your claim is covered, and explain the coverage afforded by your policy.
While your insurance carrier evaluates your claim – and throughout the entire claims process – your claims professional may recommend that you keep these “do’s and don’t’s” in mind:
- Do follow your claims representative’s instructions and be available when asked to help with the investigation and defense of your claim.
- Do keep copies of any and all correspondence with your client, and provide them to your claims representative promptly.
- Don’t sign anything you receive from the client.
- Don’t try to “fix your mistakes” or “make it right” for the client.
- Don’t admit liability or agree to any settlements.
- Don’t talk to anyone about any legal actions taken against you.
What Happens Next
If your claim is covered by your policy, your claims representative will advise you of next steps. Often, the claim can be resolved through negotiation, without litigation. However, if litigation is necessary, your insurance carrier will appoint a lawyer to represent you, and may identify other experts who may be helpful to assist in your defense. Along with your claims representative, these people will form your defense team and will stay in touch with you and make recommendations to defend, settle or otherwise resolve your claim.
Many professional liability insurance policies require the policyholder to pay a deductible in the event of a claim. Your claims representative can explain what your expenses may be, what state laws will have an impact on the financial aspects of your claim, and whether your legal expenses will be deducted from your policy’s liability limits.
Your professional liability insurance policy is designed to be there when you need it, so don’t hesitate to contact your carrier if you have questions about your coverage or any possible professional liability claims scenarios. For more information about errors and omissions insurance, or to get a free coverage quote, contact the IT insurance experts at www.techinsurance.com.
Writtten by Brenna Lemieux - check her out at Google+ or Twitter