The following descriptions of policy coverage and features are intended to give our legal clients a basic explanation of insurance terms used on our Website. We are obligated to tell you that wherever these explanations may differ from actual policy language, the policy language always prevails. If you would like a copy of the policy, simply send us an email and we’ll be happy to send one to you.
Professional Liability Insurance
Also known as Malpractice Insurance or Errors and Omissions (E&O), this coverage protects you and your company in the event a client alleges they have suffered a loss as a result of an error or an omission committed by you in the delivery of your professional services. For example:
- Failure to provide a service
- Improper documentation
- Improper supervision
- Misrepresentation of facts
- Violations of state and federal law (e.g. violation of right to privacy), and many more
Professional Liability covers your organization, your professionals and/or employees in the course of providing professional services to your clients. In addition to paying for covered damages, the policy available through Target also pays for legal defense costs — even if the claim is bogus. Considering that the cost for legal services can quickly add up to thousands of dollars (even hundreds of thousands), defense cost coverage is critical.
General Liability Insurance
This coverage is designed to protect your home inspection business from many exposures, including claims that result from 3rd party (i.e., your clients) accidents. For example, a client trips on a home inspector’s ladder and suffers a serious injury. Most bodily injury and property damage mishaps associated with inspections are included in the General Liability coverage provided through Target.
Identity Theft Recovery Coverage
This “on-the-house coverage from Target’s insurance company partner is included with every Professional Liability policy. It provides up to $25,000 in coverage (additional to the policy’s coverage limits) to help the owners of an insured firm recover from an identify theft. For details about covered expenses, please see our Identify Theft Coverage flyer.
While most professional liability policies are “Claims Made and Reported” (see below), Occurrence policies are occasionally available. Target’s Home Inspectors Program is a good example –home inspectors who currently have an Occurrence policy, can keep that choice, or switch to a Claims Made policy. There is no difference in coverage but there is a significant difference when it comes to claims.
An occurrence policy provides coverage for an error or omission that takes place during the policy period, regardless of when the claim is reported. In other words, this type of policy includes protection for any covered claim that may be filed at any time in the future (up to the limits on the policy in force at the time of the incident). The company that provided that in force policy would be responsible for paying the covered claim.
Here’s an example that may help:
Smith Inspection Services purchased a professional liability policy on an Occurrence form from the ABC Insurance Company, effective 1/1/2014. In 2015, your agent moved your policy to Target Professional Programs. You are then sued by a client for an inspection error that occurred in June 2014. Since your policy with ABC Insurance Company was in effect at the time this error “occurred,” ABC would be responsible for the claim, up the coverage limits on the policy you purchased from them.
Claims Made and Reported Policy
A Claims Made and Reported policy covers only those negligent acts or omissions that occurred during the policy term and reported it to the insurance company during the policy’s twelve month term. Claims for incidents that occurred before the policy’s effective date, or reported after the policy’s expiration date would not be covered — unless the insured also had optional Prior Acts Coverage or an Extended Reporting Period (see below).
Prior Acts Coverage / Retroactive Date
Because there is often a lag between the time services are rendered and when a potential claim is made known, Prior Acts provides coverage for errors or omissions claims that arise from services rendered prior to the current policy’s effective date. The Retroactive Date is the date back to which Prior Acts Coverage is effective.
Target’s Policy: If your Professional Liability coverage has been continuous, we offer optional Prior Acts Coverage.
Here’s an example that may help:
If the term of a claims made policy is from January 1, 2015 – January 1, 2016, and the insured has Prior Acts Coverage with a retroactive date back to January 1, 2010, the current insurance company would be responsible for claims that occurred anytime after 1/1/10 if those claims are reported during the policy term (1/1/15 – 1/1/16). Because the insurance company is accepting exposure for a longer period of time, there is an additional premium for Prior Acts Coverage.
Extended Reporting Period (ERP)
You may know this as “Tail Coverage.” Almost the opposite of Prior Acts Coverage, an ERP extends the time during which a negligent act or omission that occurred during the policy term can be reported as a claim to the insurance company. With an ERP, claims that would have been covered only during the policy term are covered during the term of the ERP.
Target’s Policy: We offer home inspectors the option to purchase a 1 year ERP, in conjunction with a Claims Made policy.
Definition of Insured
The definition of who is an insured depends on the type of company. For example, if the insured is an individual, the inspector and his / her spouse are insured with respect to the conduct of a business in which the insured is the sole owner. With stipulations noted in the policy, newly acquired or newly formed organizations over which the insured maintains ownership or majority interest will qualify as a Named Insured if no other similar insurance is available to that organization. Coverage under this provision is afforded only until 90th day after acquisition or formation, or until the end of the policy period, whichever is earlier. Please see the policy for additional details.
Inspection services are defined as the visual examination of readily accessible systems and components forming real property and include any written reporting of the results of this examination, as well as any interviews related to the property under examination.