Financial institutions operating in today’s environment are facing the most complex challenges ever imagined. The competitive landscape and intense regulatory scrutiny are posing many new challenges. New products and services continue to evolve due to competitive pressures, mergers and acquisitions, global expansion, and new regulatory requirements in multiple jurisdictions. These new offerings, as well as existing offerings in the new regulatory environment, may result in increased risks of litigation—is your firm protected?

Coverage Overview

Professional Liability (E&O) insurance for financial institutions is designed primarily to offset existing reserves or liabilities on a client’s balance sheet and thereby helps protect against claims that may arise from the rendering of or failure to render services to third parties and/or customers. It addresses the uninsured “professional services” risk not covered by the financial institution’s traditional General Liability (GL) policy, Directors and Officers (D&O) Liability policy, or the Financial Institution Bond (FIB).

When underwritten for financial institutions, the GL and D&O policies specifically exclude claims brought by or arising out of the rendering or failure to render professional services by way of a Professional Services and/or Financial Institutions E&O Exclusion. Financial Institution Bonds and/or Fidelity coverage are primarily designed to protect the institution against loss resulting directly from the dishonest or fraudulent acts, committed by an employee, while acting alone or in collusion with others.

Allegations which may be brought by third parties/customers alleging they have suffered a “financial loss” (and resultant judgments or settlements) include:

• Breach of duty
• Neglect
• Error
• Misstatement
• Misleading statement
• Omission

A Professional Liability (E&O) policy contemplates coverage for such allegations. Even if a suit is unsuccessful, the defense costs associated with a claim can be significant and such costs are contemplated under the policy.