Understanding the General Liability and Professional Liability BI & PD Gap in Coverage

1. Understanding the General Liability and Professional Liability BI & PD Gap in Coverage Do All the Pieces Fit ? The E&O (Non-Medical) SymposiumMay 19 & 20, 2004

2. The Basics • General Liability Form (ISO) GL 00 01 11 & CG 21 16 11 • Insuring Agreement • Definitions • Exclusions either built in or attached: A. “… rendering or failure to render professional services” or B. “Description of Professional Services” 1. XYZ 2. XYZ “With respect to an professional services shown in the Schedule, this insurance does not apply to BI, PD, PI or AI due to rendering or failure to render professional services” • Miscellaneous E&O Forms • Insuring Agreement • Definitions • Exclusion: Item: “ …any claim directly or indirectly arising out of BI or PD as defined in the policy …..”

3. Insurance Company Underwriters Reinsurance Intermediary Reinsurer C Reinsurer A Reinsurer B The Reinsurance Intermediary Perspective Insurance Company Reinsurance buying habits: • Treaty exclusions • Agent accommodations • Treaty Protection • Seeking Expertise Underwriter’s Advice Reinsurance Intermediaries see more complex business

4. Sources of Information • Insurance Companies • ACE Insurance Company • AIG - American International Group • Hartford Insurance Company • Lexington Insurance Company • Reinsurance Companies • Converium Reinsurance • Everest Reinsurance • Odyssey Reinsurance

5. Contingent BI & PD Examples • Standard CGL and Professional Liability Forms • CGL excludes Real estate Errors and Omissions or Professional Liability for Real Estate Agents • E&O / Professional Liability policy excludes BI & PD • BI & PD Contingent Liability exposure • Disclosure Issue – underground tank on premises • Economic Loss – decline in value of property • PD cost to remove tank Real Estate E&O

6. Contingent BI & PD Examples • Standard CGL and Professional Liability Forms • CGL excludes TPA Professional Services • Professional Policy excludes BI & PD • BI & PD Contingent Liability exposure TPA handling medical claims and member network due to change in medical system • TPA has member network and requires claimant to go to set physicians • Claimant goes to unqualified physician which may be due to lack of TPA due diligence on the individual physicians TPA (Third Party Administrator)

7. Contingent BI & PD Examples • Standard CGL and Professional Liability Forms • CGL excludes TPA Professional Services • Professional Policy excludes BI & PD • BI & PD Contingent Liability exposure • Complete inspection and confirms quality of property • Heating ventilation or mold issues are revealed • Cost to clean up PD, BI due to mold exposure • Medical Issues / BI due to mold exposure Home Inspector Liability

8. Contingent BI & PD ExamplesOther segments to consider . . . • Consultants • Property Mangers – Condo Associations • Medical software manufactures • Municipality Programs • Lawyers Professional • Educators Liability • Security Guards • Automobile Mechanics • Scuba Instructors Consultants Property MgrSoftware Liabilityand Others

9. Pulling the Pieces Together • Real Estate E&O • Solution: • Must purchase GL and Real Estate E&O policy with carve out providing contingent BI & PD – for additional fee – or – tailored form with contingent BI & PD included • TPA Professional Liability • Solution: • Buy back contingent BI & PD coverage by endorsement on Professional policy • Seek specific coverage with contingent or indirect BI & PD included • Home Inspectors Professional Liability • Solution: • Buy back contingent BI & PD coverage by endorsement on Professional policy • Seek specific coverage with contingent or indirect BI & PD included BI & PDEndorsements-or- Tailored Form

10. Home Inspectors Liability Real-estate Brokers Buy BackContingent BI PD Endorsements - or –Tailored formincluding BI & PD Third Party Administrators Liability Consultants, Property MangersMedical Software Liability andOthers Filling the Gap …. as coverage SHOULD be afforded