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Marsh Looks to Limit Liability Exposure with Cap Provision in Client Service Agreements

Source: Crain Communications

Posted on 16 Oct 2009

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In an effort to reduce its professional liability exposure, Marsh Inc. said in March that it would ask clients to sign off on service agreements that included a $10 million liability cap.

The move, executives said, was about prudent risk management and not any widespread problem at the New York-based brokerage. They noted that the cap would not affect most clients bringing errors and omissions claims against Marsh, but would protect the firm from low-frequency, high-severity claims that could negatively affect the bottom line of the firm, which largely self-insures those risks.

“We do stand behind our business, but we are not the insurer of last resort,” Brian Duperreault, president and chief executive officer of Marsh & McLennan Cos. Inc., said at the time.

Claims of willful or intentional misconduct are excluded from the cap.

By July, Marsh said several hundred clients had agreed to its terms and only a limited number of clients had negotiated to raise the cap amount.

Other brokerage rivals, including Lockton Cos. L.L.C. and Willis Group Holdings Ltd., have said they are reviewing the liability cap concept, while Wells Fargo Insurance Services Inc., for one, said it considered but decided against implementing a cap on its liability.

Other brokers, including Aon Corp. and Beecher Carlson, declined to comment on the issue.

Ultimately, the marketplace will decide whether the cap is a good idea, observers say.