Insurance 101

Consultants are professionals that perform a specialized professional service for a fee. Typically this service is based on the provision of expert knowledge. Consultants hold themselves out as experts in a particular area and as a result can be held liable should they commit an error or omission in rendering their professional services.

In providing expert knowledge, consultants can analyze problems or opportunities associated with key business functions, recommend practical solutions and help implement these recommendations. Consulting services can be highly technical, such as the services provided by engineering consultants. Or consulting services can be more abstract and based on the consultant's unique knowledge and experience, such as marketing consultants.

Exposure

Do consultants have professional liability claims? Yes, but the frequency varies by type of consultant. If the consulting services provided do not meet a client's expectations, disputes can occur. Sometimes these disputes can result in a client seeking compensation from all parties involved, whether responsible or not. The resulting dispute can cause:

• Costly litigation
• Diversion from the business
• Damage to reputation

The typical claim would involve a financial loss by a client of a consultant due to an error or omission by the consultant. An example is the failure of a computer consultant to recommend an appropriate system for a client, resulting in a financial loss to the client.

Often, a claim or lawsuit may not involve a clear error or omission. A client is not satisfied with the result and brings a claim to obtain a different result or avoid paying a fee. These types of claims are often just as difficult and expensive to defend as a clear-cut error. Insurance typically pays for the cost of defending this type of claim as if it were a clear-cut error on the part of the insured consultant.

Professional Liability Insurance

Consultants professional liability insurance, sometimes called errors and omissions or E&O insurance, is available from a wide range of specialty lines insurers. Coverage and pricing varies greatly depending upon the type of consultant, size, location and the specific services provided.

Specific coverage provisions are important for this coverage. Some consultants require coverage with special provisions to protect themselves from unique claims arising from their specialized services. For example, an engineering consultant normally requires a policy that provides protection for property damage claims, and many professional liability polices exclude property damage claims.

Limits and deductibles vary with the size and type of insured. Standard limits for most small to medium sized organizations start at $1.0 million. Policy forms vary significantly, but the majority are claims made forms with defense costs included within the limit and deductibles.

Examples:

Advanced Insurance Services has provided proposals to a wide range of consulting accounts, including consultants specializing in the following areas:

• Architect & Engineering
• Marketing
• Environmental
• IT - Computer Consulting
• Safety
• Management
• Medical

Opportunities

The consulting segment can be a significant opportunity for new sales. Many consulting organizations do not buy professional liability coverage now. Typically this is because the professional questions the need or because they think that their General Liability coverage includes professional. Consultants are increasingly being required to carry professional liability coverage because of tighter contractual obligations.

If you want a no obligation insurance comparison, contact a professional at Advanced Insurance Services via email or Toll Free phone at 1-866-643-1557.