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Court case shows the importance of understanding professional liability insurance


Josh Glikin, a partner with Bowie & Jensen, a law firm based in Maryland, recently authored a news release that appeared in the San Francisco Chronicle, about a federal appeals court case that all businesses with professional liability insurance should understand.

The case centered around an accounting clerk who was committing wrongful acts, though no one was aware of these until months later. When the accounting firm was sued, its insurance did not cover the losses caused by the unscrupulous employee, because one provision of the policy was that it would not cover liabilities caused by wrongful acts "you" had knowledge of prior to the policy being activated - and in this case, the "you" applied to not only the business owner, but all the business' employees. Because the criminal employee did have knowledge of her own bad actions prior to the policy start date, it disqualified those acts from liability coverage.

Glikin said the case teaches that while liability coverage and other forms of business insurance are necessities, business owners or officers who sign a professional liability policy should be sure to read it carefully. Also, they should not presume the business will be covered because the signor of the policy was not aware of unlawful acts committed by one of the company's other employees.

Understanding professional liability insurance is something that all small business owners should do. Many don't realize that one lawsuit can lead to a business losing everything. While the case referenced by Glikin demonstrates that technicalities can exist in policies, business owners who explore their options will find many insurance companies provide clearly worded policies that can provide protection and peace of mind. By taking advantage of websites that compare available policies, business owners can quickly educate themselves about their options in order to make shrewd decisions.

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