January 21, 2025 • 25 mins
A must-watch for any licensed professional! Unlock the secrets to safeguarding your professional future with insights from Mark Rafail of the Rafail Insurance Agency. Discover why errors and omissions insurance (E&O) is the essential safety net for professionals in advisory roles, from real estate to healthcare. Mark shares his expertise on the differences between general and professional liability insurance, highlighting how E&O can shield you from financial setbacks, even when faced with unfounded lawsuits. Listeners gain an understanding of how this critical coverage can protect against costly legal fees and offer peace of mind in the tumultuous world of advisory services.
Explore the landscape of insurance policies every professional should consider. Our conversation doesn't stop at E&O; we delve into the importance of comprehensive coverage including general liability, cyber liability, and employment practices liability insurance. Mark guides us through the nuances of selecting the right insurance carrier and clarifies the distinction between subcontractors and employees to ensure proper coverage. Whether you're a seasoned expert or just starting your career, this episode equips you with the knowledge to tailor insurance policies to your business's specific risks, securing your livelihood against unforeseen challenges. Know Your Regulator, the podcast that inspires you to engage.
______________________________
Mark Rafail is an accomplished insurance professional with over 17 years of experience, holding licenses in Property & Casualty, Life & Health, and Series 6 & 63. In 2009, he co-founded the Rafail Insurance Agency (https://www.rafailinsurance.com/) with his wife, Sylvia Rafail, where he quickly earned accolades including Rookie of the Year and Business Insurance Agent of the Year out of 50+ agencies. Mark's dedication to excellence was further recognized when the Rafail Insurance Agency was named Houston Chronicle’s Best Insurance Agency in 2020/2021. Today, as an Independent Broker, Mark leads a team of 8 licensed professionals, providing comprehensive insurance solutions including Professional Liability, Cyber Liability, Employment Practices Liability, Workers Compensation, and more, to over 5,000 clients. His expertise in business insurance has made him a trusted advisor to companies seeking tailored coverage to protect their assets and employees.
Get more information, details and resources on Know Your Regulator - https://www.belolaw.com/know-your-regulator
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
This podcast is for educational purposes only, does
not constitute legal advice anddoes not create an
attorney-client relationship.
If you need legal assistanceabout a legal problem, contact
an attorney.
Speaker 2 (00:13):
Thank you for joining us again today on Know your
Regulator, the podcast thatinspires you to engage.
I am your host, simone Murphy,and co-hosting with me today is
Director of Legal Services forBertolino Law Firm, troy Bollier
, and we have another greatepisode lined up for you.
We are going to be talkingabout errors and omissions
(00:36):
insurance, most commonlyreferred to as E&O insurance.
We've got special guest, markRaphael, owner and founder of
the Raphael Insurance Agency.
It's a really big topic thatsome license holders may not
even know about, so it's superimportant can save you a lot of
money on your legal fees, sowe'll get into it.
(00:59):
I do want to start by levelingthe playing field for those who
do not know what E&O insuranceis.
Mark, can you talk to us aboutArizona Mission Insurance?
What is it and the purpose?
Speaker 1 (01:13):
Awesome.
Well, first off, thank you,simone and Troy for having me
Again.
My name is Mark, with theRoffel Insurance Agency.
I've been a licensed agent for17 years, but 15 years on my own
.
And very commonly, simone andTroy, when you are starting a
business or a professionalservice, a lot of people don't
(01:36):
know the difference betweengeneral liability and
professional liability andprofessional liability.
So professional liability isinsurance on your work, your
advice, your recommendations,contractual agreements or
(02:00):
disagreements, or if somebody isflat out not happy with your
services and they're pointingthe finger and they get a lawyer
involved and decide to sue youfor any financial repercussions
that they may have incurredbecause they did services with
you.
Now, a lot of people don't knowthat professional liability in,
let's say, in the real estateworld or in the insurance and
(02:22):
health benefits world, it'scalled errors and omissions.
It's still professionalliability but it depends on the
industry.
Let's say you are a doctor,physician, chiropractor they
coin it malpractice insurance.
However, it's still under theprofessional liability umbrella.
(02:43):
So although it's different termserrors and omissions,
professional liability ormalpractice or medical
malpractice it's all under thesame world or umbrella of
insurance on your work, adviceand recommendations and if you
just flat out, mess up Right.
And if you just flat out, messup right, and yeah, I don't
(03:11):
think.
Now let's tell most people,when they start in business,
they are either required to havegeneral liability to move into
their office space and theythink general liability
generally covers everythingwhich, believe it or not, it
doesn't cover much.
It really protects the landlordIf somebody gets hurt on
premise, if you damage therented space, so it's think of
(03:32):
it as physical damage tosomebody or something.
So, but in the professionalliability world you can ruin
somebody financially but notphysically.
And then you get sued and youfind out that your general
liability policy does not coveryour work, advice and
recommendations.
And then that's when you haveto defend yourself.
Speaker 3 (03:53):
Unfortunately, yeah, oh, that's a great clarification
, mark.
Really appreciate that, becauseI know a lot of people are not
insurance experts and don't knowthe fine details and the
important differences betweendifferent types of insurance
products.
I was curious if you could tellour listeners a little bit more
(04:14):
about the types of industriesand the types of professionals
that really are going to benefitfrom looking into errors and
omissions insurance,professional liability insurance
, like you described it.
Speaker 1 (04:26):
Absolutely so.
Anybody in the service industry, right, that's basically our
job is to give advice,recommendations.
There's contracts, there's duedates, so that goes for me and
you, insurance professionalattorneys, anybody in real
estate, really, if you aremaking a living or there's an
(04:51):
exchange of funds, right, thenyou definitely want to insure it
because somebody can turnaround and sue you.
Now, believe it or not, there'sindustries like engineering,
right, there's industries likeengineering.
Right, engineering, you draw upsome plans, you give it to a
builder and they build.
What if those drawings arefaulty?
(05:12):
That's under professionalliability.
So, in my recommendation, anyprofession that gives advice and
recommendations would neederrors and omissions insurance.
So doctors, lawyers, financialadvisors, insurance brokers,
health insurance brokers,architects, doctors, anybody
(05:35):
giving advice andrecommendations, I think would
want to cover that advice andrecommendations because one
disgruntled person or you know,let's say you're dealing with
somebody that you, just youcan't make happy.
No matter what, even if it'snot your fault, at least you got
a leg to stand on with.
Having a errors and omissionspolicy or professional liability
(05:59):
policy would cover your legaldefense cost, even if you're
wrongfully sued, because, again,it takes time to leave your
work and hire an attorney to sayI didn't do it and if, for
whatever reason, you arepartially, you know what happens
(06:20):
, troy and Simone.
When there's a lawsuit, everyparty gets dragged in and at the
very least let's say it's areal estate transaction.
Real estate broker says buythis investment property, and
then that investment propertyends up losing money.
Guess what, if they want todrag in the lender, the real
(06:42):
estate person, the title person,the insurance agent a good
attorney is probably just goingto throw it all out there and
see who's got insurance todefend themselves and if they
decide everybody's partiallyliable, then that's when your
liability policy can pay out,partially or fully, depending on
how exposed you were fullydepending on.
Speaker 3 (07:07):
You know how exposed you were.
That's great advice, mark,because I can say from personal
experience doing litigation workthat that's exactly right is.
You know, lots of people getdragged in and it's kind of like
let's name everybody and sortit out later let the judge or
the jury sort it out.
And, unfortunately, lawyershave a common phrase you may
have heard.
You know you might beat the rap, but you're not going to beat
(07:28):
the ride.
And it's the idea that you knowyou're going to get dragged
into this and even if you didnothing wrong, you're going to
have to go through it and provethrough legal standards that you
didn't do anything wrong.
And that takes time and ittakes money and it takes a
qualified, knowledgeableattorney, all of which, like you
said, can be paid for if you'vegot insurance that's covering
(07:50):
that situation.
Speaker 1 (08:28):
And the other thing is there's a lot of people out
there that end up retiring andbecome consultants.
Yes, and these consultants gethired by, let's say, an oil and
gas company because they had 20years of oil and gas experience.
Well, that advice andrecommendation you better
believe Baker Hughes and allthese big.
(08:50):
They require a lot of theseconsultants to carry certain
amounts of insurance.
But sometimes, as a consultant,we think that because we have
no employees and we're justgiving advice and
recommendations, that we have noexposure.
And the reality is companiesmight be making decisions based
on your advice andrecommendations and if it costs
(09:11):
them financially, then you'regoing down.
So for those that are givingadvice and recommendations or
general consultants, I highlyencourage them to entertain not
only general and professionalliability, but there are some
other liabilities that may comeup Cyber liability if you're
(09:36):
hacked of money and somebodygets hacked or somebody's
personal information getssacrificed.
Cyber liability is what's goingto defend you and cover those
scenarios.
Speaker 3 (09:56):
Yeah, and that's a great point that you raised
about regulatory actions, whichkind of segues into the next
section that we wanted to talkto you about.
You know, could you talk to usa little bit about how these
policies can cover claims thatmay be filed either in court or
just in front of a stateregulatory agency, you know,
against your, you know yourlicense, where you're looking at
(10:17):
maybe penalties, you know,maybe loss of your license and
fees and other charges?
Speaker 1 (10:24):
Absolutely so.
I believe in knowing that thecarriers that you are working
with are financially stable andthey have a team of legal
professionals that they usuallyoutsource or have in-house to
defend their insurance right.
(10:45):
So some carriers that are inthe errors and omissions or
professional liability spaceinclude Travelers Insurance, cna
Insurance, hiscox Insurance,lloydds of london.
And if there's a lawsuit thatcomes across your desk and you
come and give it to me as asyour agent, I will say, all
(11:07):
right, let's get the claimsnumber for the the carrier,
submit all the information tothe carrier and then they will
now be the ones engaging withthe disgruntled uh party, that
is is suing insured.
So the good news is it allowsyou some breathing room, legal
defense costs and evenreimbursement of lost wages in
(11:32):
some cases if you're going outand defending yourself and you
have to miss work in order to dothat.
So, to answer your question,troy your insurance policy, when
you have liability limits,defense costs are either within
those liability limits or youcan have it separate from the
liability limits, and what thatmeans is if I have a million
(11:56):
dollars in liability and I endup defending at 300,000, but I'm
liable for a million, there'sthat difference because your
defense costs were within thelimits.
If you have defense costs outof the limits, then they're
separate.
So it's a key thing to know.
But I'm here to say the higheryour revenues, the higher your
(12:20):
liability should be, because youdon't want to have a
multi-million dollar businesswith $1 million limits, because
if you're on the hook above thatyou're ruined.
Now, if you're a newer businessor your revenues are under a
million, having million dollarlimits could be just fine.
But it's good to know thedifference between legal costs
(12:41):
in the policy or outside thelimits.
Speaker 2 (12:44):
Absolutely.
I mean, that's super importantand just a really great insight
and takeaway for our viewers.
Are there other areas, say likecivil litigation, where this
type of insurance would assistwith that financial burden?
Speaker 1 (13:08):
Yes, yeah, your professional liability policy is
meant to cover you when you aredragged in for anything
representing your work.
Right Now, if somebody getshurt right due to your
negligence, that's generalliability.
However, there's many timeswhere maybe your advice is what
caused that person to get it.
So then now you have a grayarea right.
So when you have both errorsand omissions and general
(13:32):
liability, that reallyalleviates less gray area and
then you know if you want tooverlap some more.
I just mentioned, you know,cyber liability, if somebody
hacks your emails or billingsystem.
And then there's anothercoverage out there that a lot of
businesses may not be aware of,but it's called employment
(13:55):
practices liability insurance.
That is what if you're sued forwrongfully terminating an
employee or a client, if you'resued for discrimination, so even
harassment, so they call itEPLI Employment Practices
Liability Insurance.
So when you package yourinsurance with some of these
(14:18):
carriers I mentioned, they'llline item hey on our package.
You could package theprofessional liability or errors
and omissions with your generalliability, with some cyber
liability, with some employmentpractices liability.
Consultants, advisors, businessowners need to know these
(14:44):
coverages because the last thingI want to do as an insurance
agent is say that's not covered.
Go hire your own attorney,because your policy can't defend
you.
Speaker 2 (14:51):
Right.
Speaker 3 (14:53):
Yeah, no, that's great advice, mark, and I can
speak to that personally.
When I worked as a regulator,unfortunately for many years, I
saw folks who did get kind ofdragged into something and it
kind of materialized in morethan one setting.
You know, you've been talkingabout these different contexts
where different insurance mightapply and when I worked as a
(15:16):
regulator it was not uncommonfor me to see somebody dealing
with a civil lawsuit about theirprofessional conduct and advice
but at the same time have aregulatory complaint in front of
their state licensing entitythat was dealing with that same
allegation and then sometimeseven, you know, in serious cases
(15:38):
where they're making ethicsaccusations, it could even end
up in criminal court.
But so there are times whenyou've got kind of multiple
legal matters in differentsettings, but they're all
related to the same core facts,like you said, giving
professional advice and givingyour expert opinion.
Speaker 1 (15:59):
Awesome, troy.
And something else to consideris sometimes, when your name
gets dragged in and it's not onthe right grounds, you have to
clean up your name right.
And on a lot of these insurancepolicies, for example, you know
crisis management.
(16:20):
If you need to hire a thirdparty to say, okay, I'm, you
know, somebody put me on thenews for something I didn't do
and we need a third party toclean this up, they will walk
you through a lot of how tohandle it or do some
negotiations on your part or dowhatever it takes to clear your
name can encompass.
(16:45):
You know whether somebody suesyou for defamation of character
or you know vice versa If weneed to protect your character.
Speaker 3 (16:58):
your insurance policy could have coverage for that.
That's great to know.
Yeah, that's a sometimes thatcan be really crucial because in
some industries yourprofessional name and your
reputation is everything to yourbusiness and your ability to
continue generating revenue andclients so able to do business
your insurance policies Simoneand Troy are generally based on
(17:34):
your revenues.
Speaker 1 (17:36):
The higher the revenue, the more exposure you
have.
And just imagine if a claimhappened and you weren't able to
operate out of your businessfor an extended amount of time,
but you still have Susie and Boband all these people on payroll
.
You still have maybe leaseexpenses or a mortgage.
(17:57):
Business interruption couldreimburse lost revenues during a
covered claim.
So I always like to bring it upbecause it's great if you know
you're defended.
But what if you're out ofbusiness for six months?
You might not be able to bounceback.
Speaker 2 (18:16):
Wow, yeah, such a great point to make, because I
think a lot of people are notaware that there are sounds like
a bunch of different options tocreate a safeguard and, like
you said, options to create asafeguard and, like you said,
sort of a barrier that protectsthem not only their business,
(18:38):
but their name, their license.
They're protected in almost allareas.
With that being said, are theresome key factors to consider
when looking at a policy andselecting a policy?
Speaker 1 (18:45):
Yeah, I do think the carrier is it, you know, a
carrier that's financially got agood reputation.
That way, if a claim happens,are they able to financially pay
?
Do they?
Are they able to have you knowtop dollar attorneys to defend
you and them right?
The other world that I think weget kind of confused in is what
(19:07):
is a subcontractor and what isnot.
Many times, a professionalservices or a licensed person
hires other team members and ifit walks like a duck, it talks
like a duck, it's a duck.
It's same with theemployee-employer relationship.
If I'm telling you, hey, Troy,simone, I need you working on
(19:31):
this during this week, mondaythrough Friday, nine to five,
but I'm going to pay you as a1099 contractor to say I have no
employees, I subcontracteverything, so I am not liable,
well, the reality is, if theymess up and your name is the one
on the receipt, guess who'sgoing down?
(19:53):
You.
So, for insurance purposes, atrue subcontractor is somebody
you hire on one-off basis, butthey have their own entity.
They have their own insurance,but they have their own entity.
They have their own insuranceand you can tell your insurance
company you know what, out ofthis revenue, I subcontract X to
(20:15):
this person and they are eitherinsured or uninsured.
No big deal if they'reuninsured, we just want to be
forthcoming and honest becausethe insurance could cover your
uninsured subs as long as wetell them.
So I think that's veryimportant because you don't want
(20:36):
to be just the only onedefended because you might have
representatives out there thatare giving you know maybe
incorrect information or theymade a mistake on something.
You know.
I use the engineer, theengineering firm, the drawings,
you know any scenario.
So, especially if you have teammembers, we want to make sure
(20:57):
that your insurance acknowledgeswhether those are insured or
uninsured and that you'recovered.
A true subcontractor.
You say pay them, and I justreferred them and maybe you got
a little, you know, lessexposure that way.
But I see it a lot guys where,where people are, are
subcontracting things and thenmaybe that subcontractor messes
(21:18):
up.
So some advice to make surethat everybody on your team is
covered and, if they're a truesubcontractor, ask them for
proof of insurance with acertificate it's called
certificates of insurance or aCOI.
It's not a full policy but itgives you a snapshot.
Do they have professionalliability and general liability?
(21:39):
And you know what if I hired abuilder and do they have workers
comp in case that guy falls andyou know so.
A certificate of insurance isnot a full policy, but at least
gives you a screenshot.
And what most people do ifthey're hiring somebody.
They'll say give me acertificate with my company
added to your policy as anadditional insured.
(22:03):
What that means is, if I getdragged in because you messed up
, I want to be defended on yourpolicy first and then my policy
is secondary if you guys don'tstep up.
Speaker 2 (22:17):
Wow, I mean that's awesome, that's good to know,
and I had no idea that that waseven an option.
Or, first of all, thanks forexplaining that and second of
all, that is so important forpeople to have on their top of
mind awareness when they areselecting a policy or
considering.
You know different types ofinsurance.
Speaker 3 (22:38):
Yeah, I was going to say, mark, you've given us such
great information and there's alot of meat underneath the
surface.
Here I was going to ask you,you know and kind of summarizing
things, takeaways for peoplewhat are the main things?
If you were going to kind ofrecap and summarize the benefits
of E&O, because I know we'vetalked about so much.
Speaker 1 (22:58):
Yeah, I would say the benefits are.
Would you want to walk into aservice industry knowing that
they were uninsured industryknowing that they were uninsured
?
Probably not.
So for one, it's credibility.
Two, most people make a livingoff their license.
Troy, you guys know it, simone,they make a living, so it's
(23:21):
definitely worth protecting thatincome because if monies are
being exchanged, anybody couldpoint the finger at any time and
it's certainly not worthjeopardizing what may be
providing not only a living foryou but possibly many others if
you have employees.
So yes, I would say I wouldnever go into believe it or not.
(23:44):
Doctors they are required tohave malpractice insurance.
However, the amount ofmalpractice insurance is up to
them, and I've seen surgeonswith $100,000 in liability
because they got out of medschool and that's what they did.
Now they're doing millions ofdollars, millions of dollars,
(24:09):
and when that lawsuit happens,there's been scenarios where
doctors have cut the check forthat difference because they
didn't maintain reviewing it.
So I would say, if you provideall the services you offer
without just being transparent,then it's the insurance agent's
job to make sure all yourservices are covered.
Where the gray area is, guys,is when people are not
(24:32):
forthcoming with all theservices Like, yeah, I do
flooring installation.
Then you come to find out youbuilt a house, all right.
Well, there might be coveragesnot included because the
insurance company didn't knowthe risk.
So I would say the biggestbenefit is protecting your
livelihood and, you know,sleeping good at night, for both
(24:54):
the client and for the businessowner or licensed
representative.
Speaker 2 (24:58):
Yeah, that makes sense Absolutely.
Speaker 3 (25:00):
No, I completely agree.
I think it's really somethingthat everybody who's in the
business of giving professionaladvice needs to take a very hard
look at.
It's like having an autoinsurance policy because you
drive a vehicle, or ahomeowner's policy because you
have a house.
You need to have some kind ofprofessional insurance E&O
(25:22):
policy, malpractice, whateveryou want to call it and really
make sure that it's covering youboth for civil lawsuits but
also when you get a complaintfrom your regulator.
Speaker 2 (25:32):
We have stressed so much throughout this video how
crucial it is to have you knowinsurance in your toolbox.
If you're a licensedprofessional, we really
encourage you to evaluate yourcurrent coverage and ensure that
it's right for you and if youdon't have any coverage, consult
with an insurance professional.
Thank you again, Mark, for yourtime today.
(25:52):
We really appreciate you comingon and thank you to our viewers
for tuning in, Subscribe andcontinue to enhance your
professional life and, untilnext time, take care.
Speaker 1 (26:03):
Thanks.
Speaker 3 (26:03):
Troy.
Thanks, Simone.
Speaker 2 (26:05):
Thank you.
Speaker 3 (26:06):
Thanks, Mark.
Speaker 2 (26:07):
Know your.
Regulator the podcast thatinspires you to engage.
This podcast is for educational purposes only, does
not constitute legal advice anddoes not create an
attorney-client relationship.
If you need legal assistanceabout a legal problem, contact
an attorney.
Speaker 2 (00:13):
Thank you for joining us again today on Know your
Regulator, the podcast thatinspires you to engage.
I am your host, simone Murphy,and co-hosting with me today is
Director of Legal Services forBertolino Law Firm, troy Bollier
, and we have another greatepisode lined up for you.
We are going to be talkingabout errors and omissions
(00:36):
insurance, most commonlyreferred to as E&O insurance.
We've got special guest, markRaphael, owner and founder of
the Raphael Insurance Agency.
It's a really big topic thatsome license holders may not
even know about, so it's superimportant can save you a lot of
money on your legal fees, sowe'll get into it.
(00:59):
I do want to start by levelingthe playing field for those who
do not know what E&O insuranceis.
Mark, can you talk to us aboutArizona Mission Insurance?
What is it and the purpose?
Speaker 1 (01:13):
Awesome.
Well, first off, thank you,simone and Troy for having me
Again.
My name is Mark, with theRoffel Insurance Agency.
I've been a licensed agent for17 years, but 15 years on my own
.
And very commonly, simone andTroy, when you are starting a
business or a professionalservice, a lot of people don't
(01:36):
know the difference betweengeneral liability and
professional liability andprofessional liability.
So professional liability isinsurance on your work, your
advice, your recommendations,contractual agreements or
(02:00):
disagreements, or if somebody isflat out not happy with your
services and they're pointingthe finger and they get a lawyer
involved and decide to sue youfor any financial repercussions
that they may have incurredbecause they did services with
you.
Now, a lot of people don't knowthat professional liability in,
let's say, in the real estateworld or in the insurance and
(02:22):
health benefits world, it'scalled errors and omissions.
It's still professionalliability but it depends on the
industry.
Let's say you are a doctor,physician, chiropractor they
coin it malpractice insurance.
However, it's still under theprofessional liability umbrella.
(02:43):
So although it's different termserrors and omissions,
professional liability ormalpractice or medical
malpractice it's all under thesame world or umbrella of
insurance on your work, adviceand recommendations and if you
just flat out, mess up Right.
And if you just flat out, messup right, and yeah, I don't
(03:11):
think.
Now let's tell most people,when they start in business,
they are either required to havegeneral liability to move into
their office space and theythink general liability
generally covers everythingwhich, believe it or not, it
doesn't cover much.
It really protects the landlordIf somebody gets hurt on
premise, if you damage therented space, so it's think of
(03:32):
it as physical damage tosomebody or something.
So, but in the professionalliability world you can ruin
somebody financially but notphysically.
And then you get sued and youfind out that your general
liability policy does not coveryour work, advice and
recommendations.
And then that's when you haveto defend yourself.
Speaker 3 (03:53):
Unfortunately, yeah, oh, that's a great clarification
, mark.
Really appreciate that, becauseI know a lot of people are not
insurance experts and don't knowthe fine details and the
important differences betweendifferent types of insurance
products.
I was curious if you could tellour listeners a little bit more
(04:14):
about the types of industriesand the types of professionals
that really are going to benefitfrom looking into errors and
omissions insurance,professional liability insurance
, like you described it.
Speaker 1 (04:26):
Absolutely so.
Anybody in the service industry, right, that's basically our
job is to give advice,recommendations.
There's contracts, there's duedates, so that goes for me and
you, insurance professionalattorneys, anybody in real
estate, really, if you aremaking a living or there's an
(04:51):
exchange of funds, right, thenyou definitely want to insure it
because somebody can turnaround and sue you.
Now, believe it or not, there'sindustries like engineering,
right, there's industries likeengineering.
Right, engineering, you draw upsome plans, you give it to a
builder and they build.
What if those drawings arefaulty?
(05:12):
That's under professionalliability.
So, in my recommendation, anyprofession that gives advice and
recommendations would neederrors and omissions insurance.
So doctors, lawyers, financialadvisors, insurance brokers,
health insurance brokers,architects, doctors, anybody
(05:35):
giving advice andrecommendations, I think would
want to cover that advice andrecommendations because one
disgruntled person or you know,let's say you're dealing with
somebody that you, just youcan't make happy.
No matter what, even if it'snot your fault, at least you got
a leg to stand on with.
Having a errors and omissionspolicy or professional liability
(05:59):
policy would cover your legaldefense cost, even if you're
wrongfully sued, because, again,it takes time to leave your
work and hire an attorney to sayI didn't do it and if, for
whatever reason, you arepartially, you know what happens
(06:20):
, troy and Simone.
When there's a lawsuit, everyparty gets dragged in and at the
very least let's say it's areal estate transaction.
Real estate broker says buythis investment property, and
then that investment propertyends up losing money.
Guess what, if they want todrag in the lender, the real
(06:42):
estate person, the title person,the insurance agent a good
attorney is probably just goingto throw it all out there and
see who's got insurance todefend themselves and if they
decide everybody's partiallyliable, then that's when your
liability policy can pay out,partially or fully, depending on
how exposed you were fullydepending on.
Speaker 3 (07:07):
You know how exposed you were.
That's great advice, mark,because I can say from personal
experience doing litigation workthat that's exactly right is.
You know, lots of people getdragged in and it's kind of like
let's name everybody and sortit out later let the judge or
the jury sort it out.
And, unfortunately, lawyershave a common phrase you may
have heard.
You know you might beat the rap, but you're not going to beat
(07:28):
the ride.
And it's the idea that you knowyou're going to get dragged
into this and even if you didnothing wrong, you're going to
have to go through it and provethrough legal standards that you
didn't do anything wrong.
And that takes time and ittakes money and it takes a
qualified, knowledgeableattorney, all of which, like you
said, can be paid for if you'vegot insurance that's covering
(07:50):
that situation.
Speaker 1 (08:28):
And the other thing is there's a lot of people out
there that end up retiring andbecome consultants.
Yes, and these consultants gethired by, let's say, an oil and
gas company because they had 20years of oil and gas experience.
Well, that advice andrecommendation you better
believe Baker Hughes and allthese big.
(08:50):
They require a lot of theseconsultants to carry certain
amounts of insurance.
But sometimes, as a consultant,we think that because we have
no employees and we're justgiving advice and
recommendations, that we have noexposure.
And the reality is companiesmight be making decisions based
on your advice andrecommendations and if it costs
(09:11):
them financially, then you'regoing down.
So for those that are givingadvice and recommendations or
general consultants, I highlyencourage them to entertain not
only general and professionalliability, but there are some
other liabilities that may comeup Cyber liability if you're
(09:36):
hacked of money and somebodygets hacked or somebody's
personal information getssacrificed.
Cyber liability is what's goingto defend you and cover those
scenarios.
Speaker 3 (09:56):
Yeah, and that's a great point that you raised
about regulatory actions, whichkind of segues into the next
section that we wanted to talkto you about.
You know, could you talk to usa little bit about how these
policies can cover claims thatmay be filed either in court or
just in front of a stateregulatory agency, you know,
against your, you know yourlicense, where you're looking at
(10:17):
maybe penalties, you know,maybe loss of your license and
fees and other charges?
Speaker 1 (10:24):
Absolutely so.
I believe in knowing that thecarriers that you are working
with are financially stable andthey have a team of legal
professionals that they usuallyoutsource or have in-house to
defend their insurance right.
(10:45):
So some carriers that are inthe errors and omissions or
professional liability spaceinclude Travelers Insurance, cna
Insurance, hiscox Insurance,lloydds of london.
And if there's a lawsuit thatcomes across your desk and you
come and give it to me as asyour agent, I will say, all
(11:07):
right, let's get the claimsnumber for the the carrier,
submit all the information tothe carrier and then they will
now be the ones engaging withthe disgruntled uh party, that
is is suing insured.
So the good news is it allowsyou some breathing room, legal
defense costs and evenreimbursement of lost wages in
(11:32):
some cases if you're going outand defending yourself and you
have to miss work in order to dothat.
So, to answer your question,troy your insurance policy, when
you have liability limits,defense costs are either within
those liability limits or youcan have it separate from the
liability limits, and what thatmeans is if I have a million
(11:56):
dollars in liability and I endup defending at 300,000, but I'm
liable for a million, there'sthat difference because your
defense costs were within thelimits.
If you have defense costs outof the limits, then they're
separate.
So it's a key thing to know.
But I'm here to say the higheryour revenues, the higher your
(12:20):
liability should be, because youdon't want to have a
multi-million dollar businesswith $1 million limits, because
if you're on the hook above thatyou're ruined.
Now, if you're a newer businessor your revenues are under a
million, having million dollarlimits could be just fine.
But it's good to know thedifference between legal costs
(12:41):
in the policy or outside thelimits.
Speaker 2 (12:44):
Absolutely.
I mean, that's super importantand just a really great insight
and takeaway for our viewers.
Are there other areas, say likecivil litigation, where this
type of insurance would assistwith that financial burden?
Speaker 1 (13:08):
Yes, yeah, your professional liability policy is
meant to cover you when you aredragged in for anything
representing your work.
Right Now, if somebody getshurt right due to your
negligence, that's generalliability.
However, there's many timeswhere maybe your advice is what
caused that person to get it.
So then now you have a grayarea right.
So when you have both errorsand omissions and general
(13:32):
liability, that reallyalleviates less gray area and
then you know if you want tooverlap some more.
I just mentioned, you know,cyber liability, if somebody
hacks your emails or billingsystem.
And then there's anothercoverage out there that a lot of
businesses may not be aware of,but it's called employment
(13:55):
practices liability insurance.
That is what if you're sued forwrongfully terminating an
employee or a client, if you'resued for discrimination, so even
harassment, so they call itEPLI Employment Practices
Liability Insurance.
So when you package yourinsurance with some of these
(14:18):
carriers I mentioned, they'llline item hey on our package.
You could package theprofessional liability or errors
and omissions with your generalliability, with some cyber
liability, with some employmentpractices liability.
Consultants, advisors, businessowners need to know these
(14:44):
coverages because the last thingI want to do as an insurance
agent is say that's not covered.
Go hire your own attorney,because your policy can't defend
you.
Speaker 2 (14:51):
Right.
Speaker 3 (14:53):
Yeah, no, that's great advice, mark, and I can
speak to that personally.
When I worked as a regulator,unfortunately for many years, I
saw folks who did get kind ofdragged into something and it
kind of materialized in morethan one setting.
You know, you've been talkingabout these different contexts
where different insurance mightapply and when I worked as a
(15:16):
regulator it was not uncommonfor me to see somebody dealing
with a civil lawsuit about theirprofessional conduct and advice
but at the same time have aregulatory complaint in front of
their state licensing entitythat was dealing with that same
allegation and then sometimeseven, you know, in serious cases
(15:38):
where they're making ethicsaccusations, it could even end
up in criminal court.
But so there are times whenyou've got kind of multiple
legal matters in differentsettings, but they're all
related to the same core facts,like you said, giving
professional advice and givingyour expert opinion.
Speaker 1 (15:59):
Awesome, troy.
And something else to consideris sometimes, when your name
gets dragged in and it's not onthe right grounds, you have to
clean up your name right.
And on a lot of these insurancepolicies, for example, you know
crisis management.
(16:20):
If you need to hire a thirdparty to say, okay, I'm, you
know, somebody put me on thenews for something I didn't do
and we need a third party toclean this up, they will walk
you through a lot of how tohandle it or do some
negotiations on your part or dowhatever it takes to clear your
name can encompass.
(16:45):
You know whether somebody suesyou for defamation of character
or you know vice versa If weneed to protect your character.
Speaker 3 (16:58):
your insurance policy could have coverage for that.
That's great to know.
Yeah, that's a sometimes thatcan be really crucial because in
some industries yourprofessional name and your
reputation is everything to yourbusiness and your ability to
continue generating revenue andclients so able to do business
your insurance policies Simoneand Troy are generally based on
(17:34):
your revenues.
Speaker 1 (17:36):
The higher the revenue, the more exposure you
have.
And just imagine if a claimhappened and you weren't able to
operate out of your businessfor an extended amount of time,
but you still have Susie and Boband all these people on payroll
.
You still have maybe leaseexpenses or a mortgage.
(17:57):
Business interruption couldreimburse lost revenues during a
covered claim.
So I always like to bring it upbecause it's great if you know
you're defended.
But what if you're out ofbusiness for six months?
You might not be able to bounceback.
Speaker 2 (18:16):
Wow, yeah, such a great point to make, because I
think a lot of people are notaware that there are sounds like
a bunch of different options tocreate a safeguard and, like
you said, options to create asafeguard and, like you said,
sort of a barrier that protectsthem not only their business,
(18:38):
but their name, their license.
They're protected in almost allareas.
With that being said, are theresome key factors to consider
when looking at a policy andselecting a policy?
Speaker 1 (18:45):
Yeah, I do think the carrier is it, you know, a
carrier that's financially got agood reputation.
That way, if a claim happens,are they able to financially pay
?
Do they?
Are they able to have you knowtop dollar attorneys to defend
you and them right?
The other world that I think weget kind of confused in is what
(19:07):
is a subcontractor and what isnot.
Many times, a professionalservices or a licensed person
hires other team members and ifit walks like a duck, it talks
like a duck, it's a duck.
It's same with theemployee-employer relationship.
If I'm telling you, hey, Troy,simone, I need you working on
(19:31):
this during this week, mondaythrough Friday, nine to five,
but I'm going to pay you as a1099 contractor to say I have no
employees, I subcontracteverything, so I am not liable,
well, the reality is, if theymess up and your name is the one
on the receipt, guess who'sgoing down?
(19:53):
You.
So, for insurance purposes, atrue subcontractor is somebody
you hire on one-off basis, butthey have their own entity.
They have their own insurance,but they have their own entity.
They have their own insuranceand you can tell your insurance
company you know what, out ofthis revenue, I subcontract X to
(20:15):
this person and they are eitherinsured or uninsured.
No big deal if they'reuninsured, we just want to be
forthcoming and honest becausethe insurance could cover your
uninsured subs as long as wetell them.
So I think that's veryimportant because you don't want
(20:36):
to be just the only onedefended because you might have
representatives out there thatare giving you know maybe
incorrect information or theymade a mistake on something.
You know.
I use the engineer, theengineering firm, the drawings,
you know any scenario.
So, especially if you have teammembers, we want to make sure
(20:57):
that your insurance acknowledgeswhether those are insured or
uninsured and that you'recovered.
A true subcontractor.
You say pay them, and I justreferred them and maybe you got
a little, you know, lessexposure that way.
But I see it a lot guys where,where people are, are
subcontracting things and thenmaybe that subcontractor messes
(21:18):
up.
So some advice to make surethat everybody on your team is
covered and, if they're a truesubcontractor, ask them for
proof of insurance with acertificate it's called
certificates of insurance or aCOI.
It's not a full policy but itgives you a snapshot.
Do they have professionalliability and general liability?
(21:39):
And you know what if I hired abuilder and do they have workers
comp in case that guy falls andyou know so.
A certificate of insurance isnot a full policy, but at least
gives you a screenshot.
And what most people do ifthey're hiring somebody.
They'll say give me acertificate with my company
added to your policy as anadditional insured.
(22:03):
What that means is, if I getdragged in because you messed up
, I want to be defended on yourpolicy first and then my policy
is secondary if you guys don'tstep up.
Speaker 2 (22:17):
Wow, I mean that's awesome, that's good to know,
and I had no idea that that waseven an option.
Or, first of all, thanks forexplaining that and second of
all, that is so important forpeople to have on their top of
mind awareness when they areselecting a policy or
considering.
You know different types ofinsurance.
Speaker 3 (22:38):
Yeah, I was going to say, mark, you've given us such
great information and there's alot of meat underneath the
surface.
Here I was going to ask you,you know and kind of summarizing
things, takeaways for peoplewhat are the main things?
If you were going to kind ofrecap and summarize the benefits
of E&O, because I know we'vetalked about so much.
Speaker 1 (22:58):
Yeah, I would say the benefits are.
Would you want to walk into aservice industry knowing that
they were uninsured industryknowing that they were uninsured
?
Probably not.
So for one, it's credibility.
Two, most people make a livingoff their license.
Troy, you guys know it, simone,they make a living, so it's
(23:21):
definitely worth protecting thatincome because if monies are
being exchanged, anybody couldpoint the finger at any time and
it's certainly not worthjeopardizing what may be
providing not only a living foryou but possibly many others if
you have employees.
So yes, I would say I wouldnever go into believe it or not.
(23:44):
Doctors they are required tohave malpractice insurance.
However, the amount ofmalpractice insurance is up to
them, and I've seen surgeonswith $100,000 in liability
because they got out of medschool and that's what they did.
Now they're doing millions ofdollars, millions of dollars,
(24:09):
and when that lawsuit happens,there's been scenarios where
doctors have cut the check forthat difference because they
didn't maintain reviewing it.
So I would say, if you provideall the services you offer
without just being transparent,then it's the insurance agent's
job to make sure all yourservices are covered.
Where the gray area is, guys,is when people are not
(24:32):
forthcoming with all theservices Like, yeah, I do
flooring installation.
Then you come to find out youbuilt a house, all right.
Well, there might be coveragesnot included because the
insurance company didn't knowthe risk.
So I would say the biggestbenefit is protecting your
livelihood and, you know,sleeping good at night, for both
(24:54):
the client and for the businessowner or licensed
representative.
Speaker 2 (24:58):
Yeah, that makes sense Absolutely.
Speaker 3 (25:00):
No, I completely agree.
I think it's really somethingthat everybody who's in the
business of giving professionaladvice needs to take a very hard
look at.
It's like having an autoinsurance policy because you
drive a vehicle, or ahomeowner's policy because you
have a house.
You need to have some kind ofprofessional insurance E&O
(25:22):
policy, malpractice, whateveryou want to call it and really
make sure that it's covering youboth for civil lawsuits but
also when you get a complaintfrom your regulator.
Speaker 2 (25:32):
We have stressed so much throughout this video how
crucial it is to have you knowinsurance in your toolbox.
If you're a licensedprofessional, we really
encourage you to evaluate yourcurrent coverage and ensure that
it's right for you and if youdon't have any coverage, consult
with an insurance professional.
Thank you again, Mark, for yourtime today.
(25:52):
We really appreciate you comingon and thank you to our viewers
for tuning in, Subscribe andcontinue to enhance your
professional life and, untilnext time, take care.
Speaker 1 (26:03):
Thanks.
Speaker 3 (26:03):
Troy.
Thanks, Simone.
Speaker 2 (26:05):
Thank you.
Speaker 3 (26:06):
Thanks, Mark.
Speaker 2 (26:07):
Know your.
Regulator the podcast thatinspires you to engage.
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