Frequently Asked Questions

As retail brokers, we work on behalf of you, the customer, and we have access to over 25 markets.  With one exception for an “A-“ carrier, every carrier we work with is rated “A” or better by A.M. Best.

First Dollar Defense, also known as a “loss only” deductible means that there is no deductible for defense expenses in the event of a claim.  Therefore, if your policy has a $5,000 deductible with First Dollar Defense, if you have a claim that is dismissed without any damages due, there would be no deductible.  Given the same scenario in the event of a claim with damages due, the $5,000 deductible would apply.

Defense Outside the Limits, sometimes said as Claims Expenses in Addition to the Limits of Liability, means that defense costs will not erode the limits of liability in the event of a claim.  Here are some examples of how it works with a policy of $1M/$1M limits:

With DOL:  If you have a claim that costs $100,000 to defend, because these claims expenses do not erode the $1M/$1M limit, there is still the full $1M per claim limit to pay any damages for the claim.

Without DOL (Defense Within the Limits):  If you have a claim that costs $100,000 to defend, the limit is eroded by this amount, so $1,000,000 per claim limit – $100,000 defense costs = $900,000 left of the per claim limit to pay any damages.

Further, the defense costs apply the same way to the aggregate limit of liability on the policy.

Gross commission/revenue is the commission/revenue collected on an annual basis before any outside commissions & office expenses are paid, including any internal commissions.  (Note:  For a retailer, the gross commission/revenue should equal the net commission/revenue as defined below.)

Net commission/revenue is the commission/revenue collected on an annual basis *after* removing outside commissions, but before considering office expenses and internal commissions.

With a claims-made policy (as opposed to occurrence-based), if a claim comes in, it doesn’t go to the policy that was in force at the time the alleged Wrongful Act occurred.  It goes to the current policy in force.  So, if a claim comes in this year, based on something that happened three years ago, it does not get reported to the carrier/policy from three years ago.  It goes to the current carrier for processing.  That carrier will review your policy terms/conditions and look to the “retroactive” or “prior acts” date, which is the first date that you have had uninterrupted coverage in force.  This is why it is important to avoid having a “gap in coverage” as you would risk losing your retroactive coverage altogether with even a small gap in coverage.

Additionally, because your current policy is taking into account the prior policies you have purchased while maintaining continuous coverage, they are taking more of a risk as you continue to add more time to this retroactive coverage.  Traditionally, carriers will charge additional premiums in steps for the first five years of retroactive coverage.  Therefore, if year 1 is X premium, year 2 may be X premium + $10% and so on.  There are other factors that go into underwriting, of course, but if an underwriter notes that the reason for an increase in premium is due to an additional year of prior acts coverage, that is what this means and the reason behind it.

The “hammer clause” has to do with another clause, called Consent to Settle.  When a policy contains a Consent to Settle clause, which is when the carrier must seek consent from the insured to settle a claim, it is usually followed by a statement that says that if the insured refuses to give their consent, any further defense costs will then be the responsibility of the insured as will any damages above and beyond what the carrier was willing to settle for.  This is the “hammer clause” and in the previous sentence, that is considered a “Full Hammer Clause.”  There is another possibility with some carriers that is called a “Softened Hammer Clause” where the carrier agrees to split the further defense/damages costs with the insured as outlined in the policy wording.  This often falls between 50%/50% to 80%/20% (carrier/insured).  When it is not built into the policy wording, this coverage improvement is sometimes available for an additional premium via endorsement.

While it is nice to have some coverage for cyber under and E&O policy, as the two can often go hand-in-hand, any endorsement or sub-limit that would be included on a non-cyber specific policy will be more limited in both limit and scope than an actual cyber policy.  We always recommend considering an actual cyber policy that will provide all of the standard benefits that come with a cyber carrier, including dedicated cyber claims handling, a higher limit that won’t erode your E&O limit, coverage features that usually won’t be available on an “add on” endorsement, and often a dedicated cyber hotline to call in the event that you are concerned you *might* have a claim.

Most of our carriers have $5MM primary capacity, but we do have access to some that have $10MM primary capacity.  However, we can put together up to $50MM in limits via building layers with excess markets.  Need more than $50MM?  We love a good challenge!

There are a number of reasons why retroactive coverage may not be offered, but usually, it is because of extensive claims history or a gap in coverage.  In the case of an extensive claims history, a carrier may be willing to offer terms, but they may not be willing to open themselves up to the risk of additional claims coming in during what they would consider a “riskier” period.  They would also likely require some procedural changes moving forward to avoid similar claims from re-occurring in the future while they are on the policy.  If the only quotes you are able to secure are “retro inception” or “RDI,” you should consider purchasing an Extended Reporting Period or TAIL under your expiring policy to address any additional claims that would come in for the time period that policy covers.  Most E&O policies come with a basic ERP period between 30-90 days and that is not nearly enough to address these ongoing exposures.

Similarly, if you allowed your coverage to lapse and then secure terms, insurance carriers are not obligated to offer you coverage that includes retroactive coverage due to you having a “gap in coverage.”  This is why it is so important not to allow a policy to lapse either for non-payment of premium or due to the natural expiration of the policy.

Contact Us.  We have many questions we need to answer.  We honestly do not care who you are selling to the terms/conditions regarding payments, but there are some very key pieces of information of information that we need to know *before* the transaction goes through, especially if you are with particular carriers that have more restrictive change of control wording.  We need to address some E&O matters before the sale is finalized or you could risk being unable to comply with the buy-sell agreement’s wording.

Contact Us.  We have the flip-side to the questions we would need if you were selling a firm.  We may need to secure additional information, such as loss runs, current declarations pages of the entity being acquired, resumes, etc.  Once a sale goes through, there are times when the sale agreement is finalized on the insured’s way out of town and if they are now relaxing on a beach somewhere, your E&O-related questions are going to be the last thing on their minds.

The short answer is “no.”  The longer answer is that reputable professional liability carriers do not entertain mid-term quoting unless there is a compelling underwriting reason.  Not having time to shop at renewal and looking for a better premium is not a compelling underwriting reason.  Having a coverage need that your current carrier cannot meet and you have documentation of this is a compelling underwriting reason.  (e.g. if you need to add an additional insured for a contractual obligation and your current carrier will not add them, this is a compelling underwriting reason, but again, we would need to be able to present the “no” response from your current carrier to the other carriers to market mid-term.)