Aside from lawyers, doctors, accountants and architects, selling professional liability insurance to niche markets is a relatively new practice.
To be effective in the professional liability market, you must understand first how professional liability differs from general liability, and then the business of your targeted niche.
GL protects an insured from financial harm resulting from negligence that causes bodily injury or property damage. Without bodily injury or property damage under a GL policy, there is no coverage.
By contrast, professional liability protects the insured from financial harm when their error or omission results in financial loss to the claimant. Most GL policies specifically exclude professional liability, and most professional liability policies exclude GL.
In the 1990s, I was a part of an underwriting company that had the opportunity to create professional liability coverage for temporary staffing companies. Temporary employees provide services that expose an employer to losses that do not result from bodily injury or property damage.
For example, if the owner of a company fails to conduct an adequate background check on a programmer that is supplied to a bank, and that programmer goes on to hack the bank’s system and steal $1 million, that’s a professional liability exposure that a GL policy wouldn’t cover.
Here’s another example—consider a construction subcontractor who focuses on heating and air conditioning. This client’s incumbent broker never thought to discuss the need for professional liability—HVAC contractors don’t need professional liability insurance, right?
Wrong. Imagine a client asks the HVAC contractor to add heating and cooling for a new computer facility, requesting that the contractor design and install the system. It turns out the design is flawed, causing $250,000 of computer equipment to overheats and fail. Where is the coverage? GL will not respond—system design is a professional act. In order to have coverage for the financial harm the client incurs, the HVAC contractor needs professional liability insurance.
As an agent, you should be able to outline scenarios that drive home the importance of this coverage in the client’s mind. To do this, you must have a solid working understanding of their business. Can you identify an exposure to financial harm due to an uncovered GL claim that a professional liability policy would cover?
Almost every business needs professional liability insurance. Use your imagination to develop scenarios where your clients could be held responsible for financial loss resulting from a wrongful act, error or omission where the GL would not respond. Then, tell a good story—and bind some business.
Arthur Seifert has almost 40 years of experience in the insurance industry and currently oversees six niche insurance programs as president of Glatfelter Program Managers.