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iNews Articles 2011

Wellness Awareness

Glossary of Terms

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Colorado Nonprofit Insurance Agency is a wholly owned Subsidiary of Colorado Nonprofit Association

Commercial General Liability Insurance – Professional Coverage

In the last issue of iNews we discussed the basics of General Liability insurance.

We learned that liability is typically based on a failure to act in accordance with a “reasonable person” standard of care. But certain service providers, by virtue of their training and credentials, can be held to a higher standard of care. Professional liability is liability for the higher standard of care required of professionals when providing services in their area of expertise.

Two hundred years ago, professional liability was limited to the legal and medical professions, but starting in the 1960s, courts began to hold a wider range of service providers to a professional standard of care. Social workers and mental health counselors in particular became accountable for liabilities such as negligent counseling, failure to diagnose, breach of confidentiality, failure to warn, improper child placement, and negligent referral. Insurance companies responded by adding professional exclusions to commercial general liability.

A nonprofit will need professional liability insurance if:

1. there are one or more employed, volunteer or contracted professionals working on behalf of the nonprofit. Referral, or the failure to refer, to outside professionals may also establish liability,
2. the professional is providing professional services,
3. incidental professional liability coverage under the nonprofit’s general liability and D&O policies is not adequate to cover the nonprofit’s professional exposure.

Who is a Professional?

The term ‘professional’ means something more than mere proficiency in the performance of a task and implies intellectual skill as contrasted with that used in an occupation for production or sale of commodities. A ‘professional’ act or service is one involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual. Marx v. Hartford Accident and Indemnity Co. 157 NW 2d 870 (Neb. 1968)

At a minimum it should be assumed to apply to:

• anyone licensed, accredited or certified to provide services to patients, clients or students.
• anyone providing traditional or nontraditional health care services.
• mental health counselors including marriage, addiction, youth, adolescent, family or pregnancy counselors.
• social workers, especially if involved with child placement, crisis intervention, or the criminal or juvenile justice systems.
• Members of professional associations.

Note: in determining professional services, we must look not to the title or character of the party performing the act, but to the act itself.

Some nonprofits mistakenly believe that if paid and volunteer staff have their own individual professional liability policies, the nonprofit does not need its own corporate policy. Individual professional liability policies rarely cover anyone but the individual professional. The nonprofit corporation employer will almost always be named in a professional suit. Managers, supervisors, administrative personnel, and board members can also be named in these suits.

All professional liability policies cover wrongful acts, professional incidents or medical incidents, depending upon the policy, and then provide a further coverage definition in either the insuring agreement itself, the policy definitions section, the declarations page, or by endorsement. Here is an example of a coverage definition for a social services professional liability policy:

any act, error or omission arising out of the actual rendering of or failure to render professional services to others, including counseling services, in your capacity as a social service organization. Professional services include the furnishing of food, beverages, medications or appliances in connection therewith.

Consider the following points when evaluating your Professional Liability Policy:

• Professional liability is written on both claims-made and occurrence liability forms. When available, occurrence is almost always the better option.
• Most nonprofits are best served by the social services policy formats.
• Nonprofits employing social workers, mental health counselors or medical professionals need professional policies that do not exclude bodily injury.
• If possible, purchase commercial general liability and professional liability coverage from the same insurance company.

Seek the advice of your insurance agent and make sure that he or she is familiar with the full extent of your professional operations.

The staff at Colorado Nonprofit Insurance Agency is very knowledgeable about professional insurance coverages and has a great deal of experience in determining what kinds of professional coverages are appropriate for an organization. Give us a call if you would like to review your particular situation.