Up to 25% of all Professional Liability Insurance and General Liability Insurance applications are declined by the insurance carrier underwriters for various reasons. Sometimes, the technology insurance prospect engages in a type of work that is an unacceptable risk to the underwriters. On the other occasions, the tech prospect “shoots himself in the foot” during the application process by not understanding the intent behind the questions or not carefully explaining his true risk characteristics.
To follow are 6 tips that can boost your chances of getting your Professional Liability Insurance and General Liability Insurance application approved the right way without jeopardizing your coverage at the time of a claim.
- BE TRUTHFUL: You must truthfully answer all questions on the G eneral Liability Insurance and Professional Liability Insurance applications as well as not failing to disclose important information. If you lie or don’t tell the whole truth on your application, you are setting yourself up for a claim denial should you be involved in a lawsuit. Upon notification of a claim, the claims adjuster may review your original application for material misrepresentations that might have been made. A material misrepresentation is any statement, that if had been answered correctly, would have been a reason for the General Liability Insurance or Professional Liability Insurance carrier to have denied the application under its underwriting criteria. A material misrepresentation will likely result in your claim being denied. The end result is that you will forfeit your insurance carrier provided legal defense and any payments for settlement or adverse jury verdict.
- DETAILED DESCRIPTION OF YOUR OPERATIONS: You should provide a detailed description of your operations on the freeform application question instead of a one or two sentence description. A one or two sentence description makes it seem like you are trying to hide something about your services. This will make the underwriters suspicious and will result in either their refusal to consider your application or in a string of additional questions that slows down the underwriting process.
- COMPLETE AND ACCURATE DESCRIPTION OF YOUR OPERATIONS: Many insurance carriers that write Professional Liability (Errors & Omissions) Insurance for tech professionals will limit coverage for the types of work that are disclosed on the application on a particular question. You may think that you are being clever by only checking some of the types of work that you perform, but instead, you are just limited the scope of your own coverage.
- DON’T LIST A TYPE OF WORK THAT YOU CAN PERFORM BUT HAVE NO PLANS TO PERFORM: Many applicants “shoot themselves in the foot” by listing a type of work that they can perform, but have no plans of performing. Only list the types of work that you have been performing or know that you will perform within the next 12 months as of the date you are completing the application. If on the date of the application, you have already signed a contract to perform a particular type of work or are under contract negotiations to perform a particular type of work, it should be disclosed.
- INFORMATION CONTAINED IN YOUR WEBSITE SHOULD NOT CONTRADICT YOUR APPLICATION: Many tech professionals list broad categories of work that they can perform (but are not presently performing) on their website to make themselves look more professional to their prospects. Please understand that all insurance company underwriters will Google your company name and will thoroughly review your website (if any). Any contradictory information will raise a “red flag” that will either result in rejection of your application or in additional questions that will slow down the underwriting process.
- A DETAILED DESCRIPTION OF YOUR INVOLVEMENT WITH HIGH RISK TYPES OF WORK MAY MITIGATE THEIR IMPACT (To follow is a short list of high risk end uses for your technology products and services that can result in rejection of your Professional Liability or General Liability application depending upon your level of involvement):
- Financial transaction software
- Medical diagnostic hardware/software
- Manufacturing software (robotics, PLC, CAM)
- Computer aided design
- Safety or alarm equipment
- Utility and natural resource process (oil and gas, power, nuclear, etc.)
If you are involved in any high risk areas, it would be helpful to explain your involvement in detail on your application and to list reasons why your risk would be less than the average risk in such high risk areas. For example, if you subcontract out your work in these high risk areas to another tech professional who carries both Professional Liability and General Liability, this should be mentioned.