New MPL Endorsements Create Opportunities for Agents

Miscellaneous Professional Liability Classes

• Advertising agencies

• Answering services

• Audio/visual consultants

• Business/management consultants

• Communications/media/public relations

• Compensation and benefits consultants

• Copy shops

• Executive coaches

• Educational consultants

• Event planners

• Graphic design consultants

• Human resources consultants

• Insurance adjusters

• Interior decorators

• Image consultants

• Market research firms

• Notary public

• Photographers

• Procurement agencies

• Project management consultants

• Real estate agents and brokers

• Recruiting firms

• Sales and marketing consultants

• Strategic planning consultants

• Travel agents

• Training and development consultants

Source: Hanover Insurance

The broader availability of endorsements for miscellaneous professional liability insurance (MPL) creates opportunities for independent agents to better serve their small professional service firm clients and, ultimately, help grow their commercial lines businesses.

In today’s litigious society, small professional services business owners hold a greater chance than ever that they will be the target of a lawsuit. And, the risk of even a single lawsuit, whether it has legal merit or not, can spell ruin for the business.

Consider these examples of actual claims:

• A real estate agent is sued for misrepresenting a buyer. The claim is ultimately settled for $45,000. Legal fees total more than $13,000.

• A market research consultant is sued for providing flawed data to a small telecommunications company, used as part of their business expansion plan. The claim is settled for $22,000 in damages and $10,000 in legal fees.

Settlements as large as these would significantly set back most small professional services firms; and might even bankrupt many.

Still, many consultants and small professional services firms – especially those with 25 or fewer employees – continue on without insurance coverage because they are unaware of the risk or they don’t think they can afford the coverage.

Fortunately, for small professional service firm owners who are trying to protect the businesses they have built, and for the independent agents trying to serve those business owners, affordable and effective protection against such lawsuits is now available.

The MPL Opportunity for Agents

For independent agents, the broader availability of and growing need for MPL – which protects professional service firms against losses if they are sued for a service they provided or failed to provide – presents a significant opportunity to better serve customers, offering a total solution for their risk. In fact, a large majority – almost 80 percent – of the small businesses within the miscellaneous professional classes currently do not carry MPL coverage.

Also known as errors and omissions liability, MPL provides protection for a wide range of business classes, including but not limited to advertising agencies, business and management consultants, event planners and travel agents – even insurance adjustors. MPL offers coverage for actual or alleged acts of fraud, malpractice negligence, misstatements or misleading statements.

The growing opportunity around MPL also is being fueled by an important market trend. More than ever, increasing numbers of consumers and businesses are choosing to rely on a wide variety of professional services and consultants. As more and more of these consultants are honing in on their best skills to create very specialized services, they often outsource work to other specialty consultants. This in turn creates more professional services companies overall and more risk for the consultant initially contracted by the client who is now partially relying on an outside party to meet the needs of their customers.

While some small business owners may still be quick to dismiss the need for MPL, independent agents need only to point out the facts – more and more small professional service businesses face lawsuits every day, and the cost of those lawsuits can be high.

MPL Endorsements

Today there’s a growing trend of carriers offering MPL as an endorsement to business owners policies (BOPs). Structuring MPL coverage as an endorsement to BOPs allows carriers to offer lower coverage limits and more affordable pricing for cost-conscious small business owners.

For example, a typical stand-alone policy offers $1 million as the lowest limit, with minimum premiums between $2,500 and $10,000. Common endorsement standard limits range between $100,000 and $250,000, with premiums ranging from $150 to $2,000, depending on the type of business and its size.

An endorsement in this price range makes it easier for agents to engage their commercial customers, at the point of sale, in discussions about potential risks to their businesses, while reinforcing the critical role and value of the independent agent as the expert insurance advisor.

As business owners weigh the costs against the potential risks to their businesses, an MPL endorsement will appear to provide both great value and an essential element of protection.

With that in mind, we expect that more agents will embrace MPL as an opportunity to offer their customers a total solution for their needs.

David J. Firstenberg is president, commercial lines, at The Hanover Insurance Group.

Topics Lawsuits Agencies Professional Liability