Financial & Professional Services

Commercial liability packages (sometimes referred to as CPP's or BOP's) provide balance sheet protection in the form of financial reimbursement and liability protection in the form of coverage for defense costs and damages resulting from:

• Claims asserting bodily injury and/or property damage
• Product liability claims (unless excluded)
• Advertising Injury such as libel, slander and infringement related claims 
• Theft and property damage losses for inventory, business property, machinery, etc
• Loss of business income
• Equipment breakdown
• Key Broadening endorsements (Transit coverage, basic cyber, employee dishonesty, ERISA, basic EPLI, and more)

Due to the fact that endorsements can either broaden and extend coverage or limit/exclude coverage, policies should be carefully reviewed. Seemingly small endorsements such as “selling price” endorsements and business income coverage for dependent properties (such as suppliers, retailers and leaders) can provide substantial coverage enhancements. Due to the advertising risks faced by this sector, it is also often wise to seek coverage through a carrier that has a strong reputation for advertising coverage.

When it comes to professional liability for accountants, basing purchasing decisions on premium alone is ill advised. Policies can differ significantly ranging from basic (and potentially not worth purchasing) to very broad coverage. In addition to partnering with a broker with professional liability experience, it is equally important to partner with a carrier that has a strong rating and claims reputation. Thorough coverage audits are necessary - some important terms and conditions to review include:

• Coverage for former accountants, future accountants and independent contractors
• Coverage for investigations, regulatory & administrative proceedings (such as SEC or FINRA), fines, penalties and punitive damages
• Coverage written on a “duty to defend” basis (which is broader than “duty to indemnify”)
• Ensure all “professional services” provided by the firm are covered such as; financial planning, acting as a trustee or receiver, notary public services, consulting, acting in a fiduciary capacity, and other services. Many policies specifically schedule covered services or contain carve-outs for such higher risk practices.

Workers Compensation insurance is a mandatory coverage for companies with employees (including volunteers, uninsured independent contractors, leased or part time labor). It provides coverage for employees’ wages and medical payments resulting from injuries sustained while “on the job”. Coverages to consider include “broad form all states” coverage and foreign workers compensation coverage (especially important for employees traveling abroad for business). Additional employee related coverages that should be considered include: 

• EPLI/Employment liability (protection for the hiring/firing of employees and discrimination/harassment related claims)
• Employee benefits
• ERISA/Fiduciary coverage (for the administration of employee benefits)
• Long term disability
• Kidnap & Ransom (for employees traveling abroad for business)

While there is some overlap in terms of directors and officers (D&O) insurance and professional liability insurance (E&O), the two are not synonymous. A holistic solution requires both. Where E&O provides protection against claims made during the rendering (or failure to render) accounting/auditing services, D&O insurance provides coverage for damages resulting from business, management and executive decisions. Claims typically covered by D&O insurance include claims related to:

• Assertions of fraud
• False advertising & anti-trust related claims
• Mis-representation and mis-management
• Breaches of fiduciary duties
• Claims related to securities and those brought be shareholders, investors and creditors

D&O insurance policies can be structured a number of ways, but typically include options to include employment liability (EPLI), crime coverage, and Fiduciary insurance. With most accounting firms purchasing coverage for employment practice liability, it is important to understand that there is no standardization when it comes to coverage. D&O Policies differ significantly from carrier to carrier and coverage can range from basic coverage to very broad. Critical coverage differences can include:

• FLSA/Wage and hour defense coverage
• Coverage for claims asserted by partners and claims of failure to promote partners
• “Intentional acts” exclusions
• Coverage for volunteers and independent contractors
• Coverage for punitive damages
• Coverage for breach of employment contracts
• 3rd party coverage (brought by clients, associates and other 3rd parties)
• Coverage for sexual harassment
• “Hard” Consent To Settle (or Hammer Clauses) which can create an un-intended “soft target” and increase the potential for future employment related claims.

Cyber Liability insurance provides first Party coverage for damages sustained by the entity (including lost income and restoration costs) and third party liability protection for claims and lawsuits arising from: failure to protect from (or prevent) an intrusion or transmission of a virus or attack, regulatory actions, media related liability, claims asserting breach of intellectual property and more.

Claims can arise from

• Data Breaches, viruses and unauthorized access 
• Lost or stolen laptops and lost or stolen paper records
• Transmission of a virus to others
• Rasomware and extortion demands
• Media related liability
• Clerical and human errors in opening or transmitting files

Due to the large amount of personal and financial information, and and accounting firms are a huge target for hackers. Cyber criminals are also becoming more sophisticated, targeting tax returns and corporate confidential information for potential social engineering and insider trading schemes. With many cyber insurers limiting breaches to those that exposure personal information only, accounting firms should perform careful policy reviews to ensure that their policies will respond to breaches exposing corporate confidential information and/or IP as well as personal information. It is also important to note that, utilizing cloud providers for data storage does not eliminate or transfer the risks associated with storing electronic data. When placing cyber insurance, careful consideration should be given to the policy’s terms and conditions, including:

• Does the policy provide coverage for paper records as well as digital records?
• Is coverage provided for data in the custody of a 3rd party such as a cloud provider?
• Is coverage for viruses (self propagating code) excluded?
• Does the policy contain a requirement that all data be encrypted?
• Is coverage included for first party damages such as loss of business income, and notification/credit monitoring expenses (among others)?
• Are offsite losses covered (away from the insured premises)?

Crime & fidelity insurance provides protection for the entity against financial losses resulting from crime, theft and dishonest acts committed by employees, executives, independent contractors and other parties. Claims can include theft of money or securities, forgery, alteration, computer fraud, fraudulent invoicing, credit card and funds transfer fraud and more. More modern schemes include social engineering attacks (such as business email compromise, also known as CEO fraud). Third party crime coverage provides protection for claims of theft asserted by clients or customers while your employees are working on their premises or have access to computer networks.