Frequently Asked Questions
We understand that you have questions. Here are some of the frequently asked questions that we receive each year.
A claims-made and reported policy means the coverage is limited to liability for only those claims that are first made against you and reported to the Company while the policy is in force. The CAMICO insurance policy is a 'claims made and reported' policy. The insurance applies only to Claims that are first made and reported to CAMICO during the Policy Period, or that are first made and reported to the Company during an 'Extended Reporting Coverage' period, if purchased. A 60-day grace period follows the expiration of a Policy Period. After the grace period, limited coverage ($100,000 sub-limit, reduced by the deductible) is provided for claims not reported within the Policy Period or grace period.
The limit of liability reflects the claims limits of the coverage. Insurance carriers, as well as state requirements, determine the limits of liability options, and various options are available. The common types of limit of liability options generally offered include:
• Per-claim. The maximum amount of liability protection an insurer will pay for any one claim.
• Aggregate. A professional liability policy issued with an aggregate limit reflects the maximum liability for all claims during the policy term. Each defense and indemnity payment that is made reduces the aggregate limit of liability.
• Split limit. A split limit policy has a per-claim limit and an aggregate limit. The aggregate limit generally is two or three times the per-claim limit. The per-claim limit caps the amount available for each individual claim. The aggregate is the most that will be paid for the entire policy term. To illustrate, a split limit policy of $1 million per claim and $2 million in the aggregate means the firm could have a maximum of four $500,000 claims or two $1 million claims during the policy term. Additionally, a $1 million / $2 millions split limit policy will be less expensive than a $2 million policy with an equal per-claim and aggregate limit of liability.
• Separate limit of defense. Some carriers offer coverage in which the expense limit is a separate and distinct limit from the indemnity limit. For example, a policy might have a $200,000 defense limit and split limit of $1 million / $2 million. In cases where this option is offered, once the defense limit is exhausted, defense expenses may then be paid out of the indemnity limit.
• Expense outside of the limit. Some states require insurers to offer optional limit coverage, stated on the declaration page, whereby the expense limit is outside the policy limit. This is particularly true for policies with low limits of liability. This type of policy provides no cap on the amount of money paid to defend a firm. Therefore, the only kind of payment that applies to the policy limit is an indemnity payment.
The deductible is the portion of the covered loss that is not paid by the insurer. The policy will clarify whether the deductible amount paid reduces the limit of liability or if the limit of liability is in excess of the deductible amount. Most professional liability policies contain some form of deductible or self-insured retention. The deductible options most frequently found include
• Per claim deductible. The per-claim deductible is applied to each claim made during the policy period and applies to the first money paid on the claim. Many insurance companies pay the defense counsel or indemnify the claimant, and then bill the CPA firm for reimbursement of the deductible amount. Other insurance companies require the CPA firm to pay any claim amounts up to the amount of the deductible.
• Aggregate deductible. The aggregate deductible is used with the per-claim to put a cap on the total deductible amount paid out by the CPA firm during the policy term. For example, if the firm has a $5,000 per-claim deductible with a $10,000 aggregate deductible, the firm would pay the full deductible on the first two claims Thereafter, the firm would not be assessed a deductible for any further claims during the policy term. Thus, the aggregate deductible defines the CPA firm's maximum exposure for deductibles.
Every carrier has a claims management philosophy, whether it is in a written statement or not. Ask the attorneys who work as defense counsel for CPA professional liability carriers for their assessments of the carrier's claims handling process and philosophy. Most insurers make sound choices in selecting legal counsel and devising defense strategies, although some carriers may have more expertise in defending lawyers, doctors and design professionals than they do in defending CPAs - and the disciplines are very different from each other. The insurer should have skilled claims representatives on staff willing to work closely with the CPA firm and legal counsel in defending the claim.
At CAMICO, the Claims department's strategy toward claims handling includes a proactive approach and a strong emphasis on risk management. Our claims handling philosophy includes:
Solve professional liability problems fairly, efficiently and expeditiously with superior services and a personal approach.
Encourage early notification of situations that could give rise to a claim; in fact, we provide a deductible credit of 50%, up to $50,000, for early reporting of a problem if a claim should actually occur later.
Intervene where appropriate, including 'repair work' on behalf of the policyholder
Provide a proactive defense - not passive and reactionary. Upfront analysis enables the development and implementation of a plan to resolve the matter in a focused manner.
Employ a team approach that brings together the policyholder, the CAMICO representative and external attorneys and consultants, as required.
Counsel policyholders on ways to avoid or minimize exposure.