It’s routine for businesses to examine their budget on a regular basis – and cut costs wherever possible. However, many companies may mistakenly eliminate important insurance coverages, often due to an inadequate understanding of their policies. One common misconception is that Miscellaneous Professional Liability (MPL) is not necessary. However, this product can provide important coverage for professional services companies and individuals against claims of negligence or mistakes that result in financial harm to another person or company, such as misrepresentation, violation of good faith, inaccurate advice and misleading statements.

Take the following CNA claim scenario, for instance. The CEO of a corporation retired, and the corporation retained an executive search firm to assist with finding a replacement. The company provided a list of qualifications for the new CEO, emphasizing that all candidates have extensive knowledge about its type of business: manufacturing component parts for aviation communication equipment.  

The firm supplied a list of candidates, one of which was ultimately hired. The candidate stated he had experience with the corporation’s line of business; however, after he was hired, they came to realize he knew very little about aviation communication equipment. The new CEO was terminated and litigation ensued between the corporation and the executive search firm. The corporation alleged the search firm was negligent in providing candidates for the CEO position and did not check the candidates’  backgrounds. The executive search firm asserted that, based on the information supplied to them, all candidates were qualified for the position. Discovery revealed the search firm had checked the new CEO’s background and found he was on the board of a company that manufactured aviation equipment.  

The case was resolved at a court-ordered settlement conference prior to trial. Defense costs and settlement combined approached $100,000. Having MPL coverage clearly saved the executive search firm substantial money in dealing with this business dispute.  

No business wants to be without coverage when they need it, so here are some valuable reasons why it’s important to keep your MPL coverage:
   

• Your current General Liability (GL) policy may not cover professional liability (PL) claims. A standard GL policy typically excludes coverage for claims arising out of professional services.  Therefore, if your business provides professional services and your business only has GL coverage, then you most likely have a gap in coverage and may experience a situation where a PL claim is not covered.
    
• Having MPL coverage can help insure your assets. Professional liability claims not only tarnish your reputation, but also can severely affect your bottom line. Professional liability insurance helps cover the cost of investigating and defending E&O claims which could potentially have devastating effects on your financial stability.
    
• A lawsuit may be brought by anyone at any time. Any size professional company can be sued, not only by your clients, but by anyone who may suffer economic damages as a result of your company’s performance of professional services.
     

The example cited in this blog is not just hypothetical; it is an actual CNA claim. Professionals at any level, in any industry can be sued for an array of reasons. You should think twice before cutting MPL coverage from your policy.