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Published Wednesday, June 28, 2017

Imagine this: You operate a call center that provides 24-hour service to a number of different businesses, including tow truck operators. Call volume is heavy, and callers are often placed on hold and at times, even disconnected. As a result, certain customer information received by the call center was lost, incorrectly communicated or delayed in transmission to the client. Consequently, some businesses cancelled their contracts with the tow service, which resulted in a loss of more than $150,000 in revenues. Upon discovery, the tow truck company fired the call center and filed suit, alleging negligence in handling the calls and seeking recovery of lost profits.

Unfortunately, a situation like this is all too common in today's litigious society. And despite the occurrence of these situations, it's a common misperception that purchasing Miscellaneous Professional Liability (MPL) coverage isn't necessary. However, this misperception can't be further from the truth.

I have heard some businesses give the following eight reasons when they consider cutting their MPL coverage. Here, I'm going to tell you why those reasons could have disastrous results:
 

  1. I need to cut costs. This is the No. 1 reason why a business cuts its MPL coverage. However, lawsuits can arise when you least expect and the defense costs can run tens of thousands of dollars — far more than an insurance policy premium charge.
     
  2. Doesn't my General Liability (GL) policy cover MPL claims?  No. Both policies cover liabilities, but not the same ones. A standard GL policy typically excludes coverage for claims arising out of professional services, such as in cases that allege your business provided negligent professional services, failed to uphold contractual promises, provided incomplete work, or made mistakes or omissions. This could lead to a potential gap in coverage if your business does not carry MPL insurance.
     
  3. The quality of my work is excellent, and any lawsuit would be meritless. You don't have to be at fault to be sued. Frivolous lawsuits still have legal fees, and even winning a lawsuit costs money. But if you carry MPL insurance, your defense costs can be covered to what's allowable under the policy.
     
  4. My business has never faced a lawsuit. It's not if, but when. In fact, a report by the Small Business Administration (SBA) notes that between 36 percent and 53 percent of small businesses are involved in at least one litigation in any given year. Therefore, it's imperative that you seek to insure your business' assets. It is too time-consuming — and costly — to defend a claim without MPL coverage and your business operations may suffer.
     
  5. Even if a lawsuit arises, I can pay out of pocket. A lawsuit is more than a settlement or judgment. It also includes attorneys' fees, expert witness fees and other court costs. According to that same SBA report, litigation costs typically range from $3,000 to $150,000. Don't assume defending your lawsuit will be on the low end of the spectrum. According to the SBA, Just one- third of the lawsuits against small businesses cost less than $10,000 to defend.
     
  6. MPL insurance isn't required by law. Unlike Professional Liability insurance for other professions (e.g.., lawyers or doctors), MPL insurance isn't required under laws and regulations. However, it is often contractually required. For example, a client may ask a management consultant to carry $1 million in Professional Liability limits as part of the assumed contractual obligation.
     
  7. I don't see the value of MPL insurance. MPL coverage isn't designed to be used as a bank: You don't deposit premium dollars with the expectation to collect on it later. Therefore, its value can be difficult to quantify if a lawsuit doesn't arise. But know this: When claims are asserted against you, they are expensive, time-consuming, complex to navigate and take you away from running your business. Additional value? Some professions, particularly consultants, can promote their MPL coverage as a value-added asset when soliciting clients, which may lead to new client acquisition.
     
  8. My business is undergoing a transition. If your company is changing management teams, operations may be in flux. This could lead to a liability risk exposure if formerly routine activities are slipping through the cracks.
     

In addition, if you carry MPL insurance, don't allow your coverage to lapse. The last thing your business needs is a lawsuit when you mistakenly think that you were appropriately insured. In those cases, your business would be left to defend the lawsuit without the experience and engagement of qualified claim professionals. 

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As one of the largest U.S. commercial property and casualty insurers, we provide insurance solutions to more than 1 million businesses and professionals worldwide.

For more than 100 years, CNA has earned a reputation as one of the most trusted commercial insurance companies in the business. It's a powerful legacy built on expertise, solid products and great services. Since 1897, we've remained strong, helping more than 1 million businesses and professionals in the U.S. and internationally avoid and manage the risks they encounter in their daily business operations, and bounce back from catastrophes that would have otherwise forced them to close for good.

The expertise we demonstrate in the industries we insure enables us to create a broad portfolio of insurance solutions — from general liability to property to professional and management liability and more — specialized to the needs of our customers.

Our consistent and seamless approach to claims management is among the strongest in the industry. And our highly experienced risk control professionals, along with CNA's School of Risk Control Excellence (SORCE®), provide you with the tools and resources you need to understand your exposures, address potential losses, and maintain business continuity.

CNA stands apart through our financial strength, dedicated claim professionals and product and industry-specific underwriters. And our strong relationships with independent agents and brokers ensure that you receive a team dedicated to providing superior solutions to your business insurance needs.

To find the right insurance solution to fit your needs, please review our products and services, or select your industry in the drop-down menu for more specialized information. To learn more about how to identify and manage risk across your entire business, explore our useful resources by visiting Resources to Manage & Reduce Risk.

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Learn more about our broad portfolio of insurance solutions specialized to meet the needs of your business.

CNA offers a broad portfolio of insurance solutions — from general liability to property to professional and management liability and more — specialized to meet the needs of your business.

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CNA offers an array of services designed to help you manage your claims, understand your exposures, address potential losses and maintain business continuity.

Business Insurance Fundamentals

Learn more about how to identify the insurance and services you need to safeguard your business.

Are you looking to learn more about the kinds of insurance coverage you need before you contact your local independent agent or broker? We've developed some helpful resources and tools to get you started.

What kind of insurance do I need?
Identifying the right coverages that address your risk exposures and your greatest challenges is important. To help determine your business insurance needs, use this checklist to help guide your discussion with your independent insurance agent.

What is risk control?
Preventing and controlling risk can be just as important as being properly covered. CNA Risk Control offers a wide range of services focusing on management accountability, cost drivers and business solutions to help you improve your bottom-line profit.

Why use an independent agent?
Dedicated to offering the broadest selection of policies and coverage to best meet their customers' needs, independent agents represent multiple product lines from more than one carrier. CNA is proud to support the Independent Insurance Agents & Brokers of America and their Young Agents Committee. Find a local independent agent for you.

How can I prepare for an emergency?
Learn how to safeguard your business, your employees and your family in the event of an emergency by visiting Resources to Manage & Reduce Risk for online tools and resources from CNA's own business continuity planners and government organizations.

How can I better prepare for my policy renewal?
Your independent insurance agent is your best resource to ensure your business has the proper insurance coverage as it changes and grows year over year. Review this list of 10 items to prepare for your conversation about how your business and its insurance needs have changed since your policy was issued.

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