Because professional liability coverage is established through the definition of professional services, and because the coverage is written predominantly on a claims-made basis, the issue of who is named as insured, and when, can make or break your coverage.
There are several situations in which the naming of the insured and the timing of the name can create challenges.
Here is an example:
Acme Corp. is insured with a policy running January 1, 2006 to January 1, 2007. In
October of 2006, Acme changes its name to Beta Corp. Nothing else changes. The operation remains the same; the ownership remains the same. You would want coverage to continue with no changes.
The agent will usually request the named insured be changed to Beta Corp in this situation. What you really want is to add Beta as an Insured. Here's why:
Although there would be a paper trail of coverage for both Acme and Beta in the '06-'07 policy, what happens when the policy renews January 1, 2007, and the Named Insured on the policy now reads "Beta Corp.," and Acme is nowhere to be found?
If a claim is made and reported on April 1, 2007, and the defendant is Acme Corp., does the policy need to respond?
Technically, unless there is predecessor firm wording in the policy, Acme Corp. is not an insured during the '07-'08 policy period, so a carrier could decline coverage. As a practical matter, if the '07 policy renewed with the same carrier that wrote the '06 policy, they would have a difficult time declining. However, if the '07 carrier is a new one, they have no history with Acme Corp., possibly no knowledge of Acme Corp., and even though they may have provided prior acts coverage on the policy, the defendant is not an Insured.
To avoid this stumbling block, leave the Acme name on the policy. Do not "change" the name. Merely add Beta to the policy.
Stay tuned for more examples and solutions next week.