Posted on 26 May 2010
An unintended benefit of a rocky economy is the opportunity for displaced professionals to create their own consulting firms. But without the safety net of an employer, consultants need to consider what happens if they face a lawsuit related to their advice.
To address the needs of this growing segment of self-employed professionals, The Hartford Financial Services Group, Inc. now offers a miscellaneous professional liability policy with premiums beginning at less than $1,000.
"In an era of expanding risk for service-providers of all kinds, this affordable professional liability protection addresses an increasingly important need for our customers and their agents and brokers," said Sean Fitzpatrick, senior vice president of The Hartford's Middle Market and Specialty Financial businesses and a former president of the Professional Liability Underwriting Society (PLUS). "As part of our broad array of standard and specialty products for businesses of all sizes, this coverage can enhance the security of consultants and small firms - helping them achieve what's ahead."
The Hartford offers miscellaneous professional liability coverage through its Hartford Financial Products (HFP) unit, one of the nation's largest underwriters of professional and management liability insurance. The coverage is available as a stand-alone policy or as part of the company's Private Choice Encore!!(R) Policy.
"With the exodus of professionals from the traditional workplace, we expect the business services industry to grow much faster than other sectors," said Stephen Prymas, vice president of financial products underwriting at The Hartford.
The miscellaneous professional liability policy is designed for small firms that provide advice or services requiring specialized knowledge. Generally, these firms generate less than $1 million in revenue and have fewer than 10 employees. They represent a range of industries, including marketing or management consultants, executive coaches, career counselors, travel agents and event planners.
For example, a management consultant might be hired by a company's president to help the organization with strategic planning and lowering its cost structure. The consultant may provide advice on a strategy that redefines management roles and delegation, initiates spending controls, and uses a new staffing model to address the organization's needs. If the client experiences a negative impact to its bottom line after implementing the consultant's advice, the client may sue the consultant for negligence in rendering advice. Similar cases have resulted in more than $200,000 in settlement and defense costs.
Or, a self-employed market researcher might provide advice to a client on whether to establish a new product line. If the new line is introduced - and fails - the client might sue the market researcher, claiming the failure was a result of faulty research.
"Even if the lawsuit is not successful, the consultant can incur some hefty defense costs in fighting the suit," said Prymas. "For many small firms, that could mean the end of their business."
Prymas pointed out that a general liability or personal umbrella policy typically does not cover liability exposures related to business services. Sometimes, a professional services contract will require a consultant to carry professional liability coverage, but too often this protection slips through the cracks.
"It's a gap that both agents and policyholders need to be aware of," Prymas said. "With this policy, we've made it easy and affordable for consultants and advisors to obtain this needed protection."
Key features of The Hartford's miscellaneous professional liability policy include:
* A tailored definition of professional services to meet the needs of a broad range of companies;
* Coverage for personal injury, such as libel and slander, arising from the professional services;
* Coverage for punitive damages, where allowed by law;
* Liability coverage for erroneous work performed by a subcontractor;
* Coverage extension for expenses related to disciplinary proceedings in which a professional is brought before a regulatory body or association.