Contact your professional liability and employment practices liability insurance carrier or agent as soon as an issue comes up. Adverse consequences often come from CPAs taking action before consulting their risk advisers. Better safe than sorry.
Here are some reasons why CPAs should always contact their insurance carrier or agent for expert guidance:
- Taking certain actions without the prior written consent of the insurer can result in a coverage denial. Examples include admitting liability, assuming damages, voluntarily making any payments, or incurring claims expenses. Such actions will likely violate policy conditions, which may result in a denial of coverage. Policyholders should not take action without first receiving guidance from their agent or insurance company.
- Contacting your insurer or agent is a good way to avoid costly mistakes and problems. For example, misstatements on insurance applications may result in a higher premium or even the rescission of a policy based on wrong information. Call your underwriter or agent with questions about the application and the information requested. A phone call is an easy way to correct errors before they occur.
- Taking advantage of your insurer’s risk management tools will help you avoid disputes and claims. Client screening checklists, engagement letter templates and review services, specialized hotline consultations, and documentation techniques are all effective, and the more tools and resources a program provides, the better.
- Reporting a potential claim early enables the insurer to work on an early resolution, which helps the firm to get back to business as usual. The insurer may determine that it is appropriate to retain legal counsel to assist with a pre-claim situation. (CAMICO will absorb the legal expenses and help policyholders achieve a resolution in such situations.) Other services may include preparing a tax penalty abatement request, drafting talking points for communicating the facts of a situation with the client, and providing subpoena and other consulting services if the need arises.
- Early reporting helps assure coverage for the potential claim. Firms that go along with clients in attempting to a handle problem internally without reporting it to the insurer are sometimes surprised to find out later that the problem is much larger than it appeared to be. It is always a good idea to put your insurer on notice of a problem that could become a covered claim and could save the firm money in the form of reduced deductible obligations.
CPAs are often so busy that they don’t recognize or acknowledge a potential claim as it is developing. This can be particularly devastating when the damages claimed are significant and are not covered by a professional liability insurance policy that denies coverage due to timely reporting requirements not being met.
The CAMICO policy has addressed this problem with “continuity of coverage for potential claims,”after
which removes late reporting as a basis for coverage denial as long as the insured became aware of the potential claim
the inception of the first of consecutive policies. The deductible reduction (CAMICO provides a 50 percent, up to $50,000, for early reporting of a potential claim during the policy period in which it becomes known) will not apply in this scenario, but policyholders who qualify will still have full coverage.
Ask for advice on how to utilize risk management services and resources. You can find out a company’s service attitude by asking about and using its services. If you are interested in a good partnership with your company, the company should do its best to help you minimize losses and control premiums.
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. Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued.