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 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, in excess of the per claim deductible, or 50% of the per claim limit of liability, whichever is less) is provided for claims not reported within the Policy Period or grace period but are reported during the immediately succeeding policy period, and the insured has continuously maintained the policy during that 12-month period.
CAMICO’s Continuity of Coverage for Potential Claims provides protection and helps eliminate coverage gaps for potential claims known to an insured while coverage is consecutively renewed with the CAMICO program. This feature maintains coverage for potential claims that were not timely reported by policyholders who continuously renew their policies with the CAMICO program.
The Retroactive Date, stated in the policy’s Declarations, is the earliest date from which the policy provides coverage for Professional Services, sometimes referred to as “prior acts coverage.” Claims arising from acts, errors or omissions that occurred prior to the policy’s Retroactive Date (or the “prior acts date”) will not be covered by the policy unless specifically included.
The limit of liability reflects the claims limits of the coverage. Insurance carriers, as well as state requirements, determine the options for limits of liability. Various options are available. The common types of 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 million split-limit policy will be less expensive than a $2 million policy with an equal per-claim and aggregate limit of liability. (See the following table on “Examples of How Costs Affect Limits.”)
• Separate limit of defense. 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 separate defense limit and split limit of $1 million / $2 million. In cases where this option is offered, once the separate defense limit is exhausted, defense expenses will 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.
Examples of How Costs Affect Limits
The following table shows examples of policy limits, costs of a claim, and remaining limits available for subsequent claims after indemnity and defense costs shown are paid. Note that the claims amounts paid are limited by both the per-claim amount and the policy aggregate amount.
The deductible is the portion of the covered loss that is paid by the policyholder. 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.
For example, if the firm’s policy has a $1 million limit of liability and a $10,000 deductible, and the deductible amount paid reduces the limit, then the limit is actually $990,000 after the deductible is paid. (See the graphic, “Example: $1 Million Limit of Liability.”)
The CAMICO Mutual policy provides that the per-claim limit of liability shall apply in excess of the per-claim deductible. This provides the full limit above your deductible, versus being reduced by the deductible. That way, you have more protection toward liability for damages and any applicable defense costs arising out of a claim; the per-claim limit of liability is effectively larger. 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 deductible 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 reporting of a potential claim during the policy period in which it becomes known, or for use of formal mediation to attempt to resolve a claim.
• 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.
CAMICO’s policy, which is a "claims made and reported" policy, applies only to claims that are first made and reported during the policy period. Therefore, claims received after a CPA firm discontinues its policy would not be covered unless Extended Reporting Coverage (ERC), or "tail" coverage, is in place to cover claims.
CPAs who are retiring or become permanently disabled, or who cancel or non-renew a policy for other reasons, are generally interested in purchasing ERC. CAMICO’s policy extends the right to purchase ERC to policyholders under specific terms. Sole proprietors and two-professional firms are generally able to purchase ERC from CAMICO under relatively favorable terms—an important feature of the policy. Other firms may also find favorable ERC terms, depending on factors such as policy limits and claims experience.
ERC can also be used in certain firm merger and dissolution situations, depending on the circumstances. For more information, contact CAMICO at 1.800.652.1772, or email firstname.lastname@example.org.
The CAMICO Mutual policy provides that such expenses are not chargeable against the per-claim deductible or against the applicable limit of liability. The limit and deductible are not triggered until an actual claim is made. This in effect expands the coverage provided to policyholders for potential claims.
Cyber coverage should include breach response services, network asset protection, cyber extortion (ransomware) expenses, proactive cyber-security resources, and other insurance program components. Effective coverage is available at reasonable rates. Services should be provided by experts experienced in cyber incidents, legal and notification requirements, IT forensics, and other cyber-related services. For more information, email CAMICO at email@example.com.
Policyholders should not take such actions without first receiving guidance from a risk adviser with the insurance company, or without the prior written consent of the company. Such actions will likely violate policy conditions, which may result in a denial of coverage. Avoid agreements that include “hold harmless” or indemnification provisions that are one sided and not in the firm’s favor.
Firms that go along with clients in attempting to a handle problem internally without reporting it are sometimes surprised to find out later that the problem is much larger than it first appeared to be. If the problem was not reported timely in accordance with the policy, the claim might not be covered.
Claims and potential claims should always be reported as soon as possible. Do not take any action on them without guidance from your risk adviser. If CAMICO determines that it is appropriate to retain legal counsel to assist with a potential claim situation, the legal expenses will be absorbed by CAMICO.
Some insurance programs discourage policyholders from reporting problems by providing premium credits for claims-free status. This approach in effect encourages policyholders to handle potential claims on their own—a dangerous practice with potentially disastrous financial and reputational consequences for a CPA firm.
CAMICO has always encouraged policyholders to report early so that disputes and potential claims have a better chance of being resolved early, enabling the firm to avoid time-consuming troubles and remain focused on servicing their clients.
Insurance alone is not a solution for reducing risks. That is why CAMICO’s program goes beyond just providing CPA insurance options. Policyholder firms have free, unlimited access to CAMICO’s proven approaches that have helped numerous CPAs build thriving ﬁrms and avoid damaging claims.
Our focus on high-quality services, expertise, resources and tools—custom-designed for CPAs—distinguishes CAMICO as the preferred choice in the profession, and we continuously strive to earn that distinction. Visit the Risk Management section on the CAMICO website to learn more.
Yes, in addition to CPA Professional Liability Insurance, CAMICO offers Employment Practices Liability, Business Owners Package and Workers Compensation insurance. As a company singularly focused on CPAs, our products and services are designed to deliver the expertise, support and solutions necessary to protect CPA firms. The team at CAMICO can help you select the right coverage options to meet the needs of your firm, helping eliminate any gaps in your firm’s liability protection. To learn more about the other CPA business insurance solutions available from CAMICO, visit the Solutions section on the CAMICO website
Disclaimer: This information is provided as a general overview and is not intended to be a complete description of all applicable terms and conditions of coverage. Actual coverages and risk management services and resources may change without notice and are subject to policy provisions as issued.