A common practice amongst professionals, especially attorneys, is the acceptance of board positions on for-profit and not-for-profit entities. And although most of the time the decision to accept these positions is done with all good intentions, it doesn’t mean that there is no exposure related to the acceptance of those positions. 

If you’re an attorney, or if you’re any professional, and you’re sitting on a board now or you’re contemplating the acceptance of a board position, I think there’s a couple of things you need to do. 

First off, you need to go to that organization and ask them if they have a separate directors and officers policy. If they do, great! Ask them for a copy of that. That way, you can put it in your file, and you’ll know you know the limits that they have to cover you, the deductible if there is any deductible and it’s applicable to you and the policy period so you know when it expires, and when it needs to be renewed. 

If the organization comes back to you and says no, that they don’t have a separate D&O policy, I think you need to ask them if they would consider or have they ever considered purchasing a D&O policy. And this is not just for you, the person asking the question. You’re asking for all of the other directors and officers, the employees of the organization, and even sometimes the volunteers of that organization. It’s something that they really need to consider and look at. Secondly, you need to contact your legal malpractice insurance company. 

Now, how does accepting a board position affect your coverage? Most policies actually exclude your acts as an officer or director of an outside organization. There is also an ownership interest in most policies that state that if you have any type of ownership, or even if you just own, manage or control an outside entity, your professional services that you provide to them are excluded under the policy. 

So there are definitely exposures that can and do arise when you accept a position on a board, be it not-for-profit or for-profit. 

My comments are not intended to stop you from accepting any position on any board. My comments here are merely to ask you to take a step back before you accept, ask a couple questions, and make sure you know the exposure that you’re accepting by accepting the board position.

In the world of professional liability insurance, ERP stands for an extended reporting provision.

This usually comes in the form of an endorsement, and it usually occurs in a few situations:

1. In the event of your death
2. In the event of your retirement
3. Your entity dissolves

With a claims made policy, you need this extended reporting period provision to be issued, so your prior acts or your past professional services are covered under the last policy that you purchased.

What is a retroactive date?

When you purchase professional liability insurance, most of the time, you’ll see what’s known as a retroactive date listed somewhere on your declarations page of the policy. This retro date actually refers to the date that the coverage will go back to, to cover you for your professional services.

If you are an older professional, like me who has been around for the last 30 years, you might have a retro date of 1/1/1989. Or if you’re a new professional, like my daughter, you might have a retro date of 1/1/2015.

Again, just remember, it’s the date that the policy will refer to or go back to cover you for the professional services you perform for your clients.

What is the difference between professional liability insurance and general liability insurance?

The best way to answer that question is really just to give you a couple of examples. A professional liability policy covers the professional for the work that he or she does on behalf of their clients. So a lawyer’s professional liability policy would cover a lawyer for those professional services that they are doing or performing for their clients.

A general liability policy is what we like to call “slip and fall insurance”. If somebody were to walk into your office and slip and fall where they may get hurt a little bit, they could turn around and sue you for bad back medical claims or their hospital visit, etc. This is where your general liability policy would come into play.

As general liability and professional liability kind of sound the same, they are two very different types of coverage.

Why do you need professional liability insurance?

The easy and obvious answer to this question is so the professional protects himself or herself against claims of malpractice. A more insightful or thoughtful answer is, you buy professional liability insurance not only to protect yourself, but also to protect your client.

In the event that you do make a mistake or you do make an error, you want your client to be able to be made whole again, because of your error. So don’t just buy professional liability insurance to protect yourself, buy it to protect yourself and your client.

If you have any questions regarding professional liability insurance, contact us at INtegrity First Corporation.