Risk management is an important part of running a professional firm. Unfortunately, professionals can and do make mistakes which can lead to a professional liability claim. There are even situations where you can face an errors and omissions claim when you haven’t done anything wrong.
Professional Liability Insurance coverage can help protect your practice, but only if you understand how your coverage works and follow its terms and conditions closely. For proper management of the risk, your active involvement is needed, since a risk management program isn’t something you can let run on autopilot.
Thankfully, successful risk management is easy if you know what to do. Here are 5 secrets to better manage the risks of your practice.
1. Know How and When to File a Claim
With serious problems often few and far between, knowing how and when you should file a claim is not always easy. Difficulties may include that you have never needed to file a claim before, you haven’t filed a claim with this insurer, or it’s been so long you’ve forgotten what you need to do.
Even though the process can be daunting, it’s important to act quickly as soon as you become aware of a potential problem. Insurers rely heavily on prompt reporting of claims and the conditions of your coverage may also require it.
Often, it may be hard to know if an issue rises to the level of making a claim or if it will resolve on its own. From an insurer’s perspective, it’s always best to err on the side of caution and report any situation covered by your policy that may result in a claim as soon as you know about it.
2. Understand Your Claims-Made Policy Rules
Understanding your insurance policy is always a big key to managing your risk. But it’s particularly important when it comes to a professional liability policy. These policies are written on a “claims-made” basis. That means that coverage is tied to the annual policy period in which you first become aware of a potential claim.
Claims-made policies often work in your favor. Unlike an “occurrence” basis policy, where coverage is tied to the time period in which the error occurred, a claims-made policy covers you now, potentially months or years later, after the problem first occurred.
However, there’s one important caveat. You have to report your claim within the same policy period in which you became aware of the problem. If your policy coverage is renewed or modified between when you found out and when you filed a claim, your claim may be denied, exposing you to significant risk.
3. Track Your Policy Expiration Dates
All insurance policies come with expiration dates and it’s important to keep track of them on your firm’s calendar. Usually, this is the one-year anniversary of when you last purchased or renewed your coverage, but your policy documents will give the exact date for your records.
Expiration dates are very important in insurance for a couple of reasons. Firstly, you don’t want to miss a renewal, go without coverage and be exposed to unnecessary risk. Secondly, you want to make sure all claim matters and potential claim matters have been reported to your insurer before your next coverage renewal or modification.
With a claims-made policy nearing its expiration date, time is of the essence. You’ll want to ensure that you have processes in place to identify any potential claims and follow the proper procedures for getting the necessary information to your insurer in the days and weeks before your renewal.
4. Establish Claims Reporting Procedures
Because it’s so important to identify and act on claims and potential claims in a timely manner, it’s important to establish some claims reporting procedures to minimize risk to the practice.
Often the team member who first becomes aware of an issue is not the one who will need to handle the claim. Miscommunication, failure to escalate and lost messages can result in a claim not be reported or reported late. Some insurers consider an old email that shows prior knowledge of the claim as grounds to deny a claim reported after the end of a policy period.
To reduce the risk of a denied claim, it’s important to have a reporting system in place. Team members can then report the claim internally through the proper channels so that you can meet all the necessary terms and conditions of your policy.
5. Educate Team Members on Risk Management
Good communication can go a long way toward reducing the risk your firm faces. But it’s important to make sure everyone in your practice knows what to do in certain situations. A plan that isn’t communicated effectively will leave you open to unnecessary risk.
Make sure everyone on the team understands that problems can and do occur, giving examples of questions or statements from clients or stakeholders that could indicate a problem. Provide documentation of the procedures to follow to ensure claims and potential claims are immediately reported. Make sure everyone knows what channels of communication to use and how to confirm important messages are received.
Importance of Insurance Coverage
To better manage your risk, make sure you understand how and when to file and claim. Remember that claims need to be reported in the same policy period in which you became aware of them, so keep track of your policy dates. Make sure your team members know what to do when faced with a potential claim so it can be escalated through the channels you establish.
It can be a risk to your career and reputation if you don’t have the Professional Liability Insurance coverage you need to protect your practice. At Lockton Affinity, we understand the needs of a wide variety of professionals, including lawyers, advisors, architects, engineers and more. Plus, with Lockton Affinity, you’ll benefit from competitive coverage and prices and best-in-class customer service.