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    Professional Liability Insurance

    Aloha,

    Many years ago I had a material error on a tax return. The issue was corrected and the client had interest and penalty paid on the spot. In this rare circumstance the tax was also paid in the interest of public relations. After that he threatened a malpractice law suit for a very large dollar amount. Although it would be hard to argue he had any unpaid "damages" as a result of the actions the cost of defense would have been more than settling. We settled. I wrote a check.

    Issue:

    My liability carrier was worthless in defending me. They looked at the cost to defend versus the potential liability. They only pay interest and penalty or actual damages which was a modest dollar amount. Many other professions have a mutual liability insurance company where they will defend the professional. This insurnace is more like pre-paid legal and malpractice rolled up into one.

    I pay a hefty premium for many years and am considering not having liability since I could not have been tossed under the bus fast enough and the interest and penalty is generally not a huge dollar mount.

    What are other tax people doing in this circumstance? Is there a mutual insurance company that respects the reputation of the professional?

    Mahalo,

    Bjorn

    #2
    Malpractice

    Examine all your communications with clients....e-mail, mail, forms, oral.... and make sure that in case of a problem all the evidence exonerates you and clearly says the client did not follow directions or do his job. My main fear is of omissions, something I did not ask about, and so I go out of my way to gather info. Once it is in my hands I can deal with it or send the client elsewhere.
    I always send clients a comprehensive questionnaire with a supplement asking about items not having reminders coming in the mail like loss carry overs. My forms all say ..."please review before doing anything". I don't take CPE courses teaching the easy popular mundane tax issues....I stick with issues having large dollar amounts like retirement plans and/or involve complications like fringe benefits(HSA's, etc).
    If a client has an issue with me I want him stopped in his attorney's office with the words..."you don't have a case".
    This posting is for general discussion purposes and is not meant to be reliable tax advice.

    Comment


      #3
      Prof Org

      You most likely belong to one or more professional organizations that promote some firm. I would start with that firm or those firms. Talk to the agent and ask to speak to a customer who has had to use his or her coverage and is still a satisfied customer. You could also post on this and other boards asking information about specific firms.

      With all that said, I never heard of an insurance company that would for even one moment consider not settling if they could settle for an amount no more than what they expected winning to cost them.

      To my mind you made a tactical mistake in not having a lawyer involved when you paid the client. Paying the damages should have protected you from further liability in that matter.
      Last edited by erchess; 07-29-2010, 07:35 PM.

      Comment


        #4
        So -- Who are some Professional Liability Carriers?

        My business is growing and currently I do NOT (there I said it) have a policy in place.
        Who can I contact? What do they normally run?

        Thanks

        (Now I feel like an @$$
        Matthew Jones
        Tax Preparation
        Computer Consultant


        Tax Season is here!
        Make sure everything is working, extra ink or toner is available, Advil in top drawer!

        Comment


          #5
          M A J

          If my memory is right you belong to NATP as do I. They have a relationship with a company called Marsh which gives a discount to NATP members. If you care the NAEA has a similar deal with an outfit that used to be known as Everest. You could also google "Errors and Omissions Insurance for Tax Professionals" or some such. State Farm offers the insurance under consideration but please remember that they are partnered with Turbo Tax.

          I have never needed to draw on my insurance so I can't comment on that side of things.

          Comment


            #6
            Originally posted by MAJ View Post
            My business is growing and currently I do NOT (there I said it) have a policy in place.
            Who can I contact? What do they normally run?

            Thanks

            (Now I feel like an @$$
            Mine is Philadephia Insurance Co. (AKA Marsh Affinity Group Services-Accountants)
            Cost $317 per year, $100K coverage, furnishes a lawyer.
            No claims made, so don't know if it's good or like Bjorn's.

            877-438-7459

            Comment


              #7
              Professional Orgs

              Check with your professional organizations and also read the ads in your professional journals. NAEA has a new plan they're touting that's designed for EAs that I'm going to check out as my current policy nears renewal. I'm currently with EZ Insurance Solutions (Protecting Financial Services Professionals), underwritten by CNA and carrying an AON logo also. $516 for $100,000/$250,000 which I think was a huge jump from my first couple of years and is why I'll be following this thread and shopping this fall before my January renewal.

              Comment


                #8
                Fees & Statistics..

                It would be great to hear from some of the others -

                Do you carry a policy ?
                What liability do you carry?
                With whom & about how much do you pay?

                Personal questions but it's a general topic so I don't think it invasive...
                Matthew Jones
                Tax Preparation
                Computer Consultant


                Tax Season is here!
                Make sure everything is working, extra ink or toner is available, Advil in top drawer!

                Comment

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