Professional Liability Insurance

The insuring agreement pays damages and defense for a claim arising from a wrongful act in rendering, or failing to render, professional services. Everything turns on how the policy defines those services, so the definition should describe what you actually do.

For senior living, that is resident care, and it is often called malpractice. The claims we see are familiar to every operator:

• Falls. The most frequent allegation, usually framed as failure to assess fall risk, to supervise or to respond to a call light.
• Pressure injuries. Wounds that developed or worsened in the community's care, alleged as failure to reposition, monitor or report.
• Medication errors. Wrong dose, wrong resident, missed doses, or medication technicians acting outside what the state allows.
• Elopement. A resident with dementia leaving a secured unit, often the most severe claim in assisted living malpractice insurance because of what happens outside.
• Failure to monitor or transfer. A change in condition that was missed, or a hospital transfer that came too late.

For a property manager the cover is errors and omissions. Property manager errors and omissions insurance answers allegations such as a missed renewal that left an owner's building uninsured when it burned, rent collected and posted to the wrong ledger, a lease signed with terms the owner never approved, a budget or reconciliation error that cost the owner money, a tenant screening mistake, or a failure to act on a maintenance problem the manager knew about.

Most professional forms also cover the insured's employees and, by endorsement, contracted staff such as agency nurses or leasing agents. Disciplinary proceedings before a licensing board, and the cost of responding to a regulatory inquiry, are sometimes added as a small sublimit.

The common exclusions are narrow on paper and decisive in practice:

• Intentional and criminal acts. Usually excluded once established by a final adjudication, with defense paid until then.
• Fines, penalties and punitive damages. Civil money penalties from a survey are not damages, and punitive damages are often excluded or uninsurable under state law.
• Contractual liability. A management agreement that promises results or indemnities beyond ordinary negligence takes on liability the policy will not follow.
• Bodily injury and property damage on a manager's errors and omissions policy. Those claims belong on general liability for premises injury and damage, and the two forms have to meet without a gap.
• Discrimination and fair housing. Often excluded or sublimited on a manager's form. Those claims belong on employment practices liability with third party coverage.
• Theft of client funds. Excluded as a dishonest act. A manager's exposure to an employee taking owner or tenant money sits on commercial crime insurance for employee theft and fraud.
• Prior acts and known circumstances. Anything before the retroactive date, or known and not reported before the policy began.

Senior living forms add a layer of their own. Abuse and molestation is commonly sublimited, sometimes to a fraction of the main limit, and some forms exclude it outright for certain levels of care. A hospice or home health program run from the campus may be excluded unless it is scheduled.

Almost every professional form is claims made. The policy that responds is the one in force when the claim is first made, provided the wrongful act happened after the retroactive date. Three dates therefore matter more than the limit:

• The retroactive date. Acts before it are not covered. Keeping it unchanged at every renewal and every carrier change is what preserves cover for past work.
• The policy period. A claim must be made, and usually reported, inside it or inside any extended reporting period.
• The tail. An extended reporting period bought when coverage ends, which lets claims for earlier acts be reported later.

The tail matters most at a change of ownership. When a senior living community is sold, the seller's policy stops and resident claims for care given before closing can arrive for years, so the purchase agreement should say who buys the tail and for how long. When a management contract ends, the manager remains liable for its work on that building, and its own policy has to stay in force with the same retroactive date or carry a tail.

Senior living professional liability is rated per bed or per unit by level of care, with memory care and skilled nursing at the top, then adjusted for state, claim history and staffing. A manager's errors and omissions is rated on fee income, with the type of property managed and the services provided as the main modifiers.

Senior living programs commonly combine general and professional liability on one form with one aggregate. That removes the argument over which policy a fall belongs to, but it means a bad year of care claims also uses up the limit for premises injuries. Defense costs inside the limit are common on both forms, so a long defense shrinks what is left to settle. The umbrella and excess layers above the primary must schedule the professional policy as underlying, or the largest claims a community faces sit outside the tower.

For senior living, the underwriter reads the care operation more closely than the building:

• Licensed beds or units by level of care, current census, and any change in acuity since the last renewal.
• State survey results and deficiency history for the last three years, with plans of correction.
• Staffing ratios by shift, turnover, agency use, and how new staff are screened and trained.
• Incident reports, falls and pressure injury rates, and how often residents are reassessed.
• Memory care controls: secured doors, wander alerts, elopement drills and the response plan.
• Admission agreements, arbitration provisions where used, and how resident complaints are logged and answered.

Skilled nursing facilities that take Medicare or Medicaid are surveyed against the federal requirements for long term care facilities in 42 CFR Part 483, and those inspection results are published on Medicare's Care Compare, where underwriters and plaintiffs' lawyers both read them. Assisted living and memory care are licensed and inspected by each state instead, so the state survey file is the record an underwriter asks for.

For a manager, the underwriter wants the management agreement used, the services offered (leasing, collections, construction oversight, insurance procurement), the number and type of properties, how insurance renewals for owners are tracked, how trust accounts are reconciled and by whom, and any claims or demand letters from owners or tenants.

Because the trigger is the claim, reporting is where coverage is won or lost. A demand letter, a request for records from a lawyer, a complaint to the state, or an owner withholding fees over a mistake can each be a claim under the policy's definition. Most forms also let you report a circumstance that may become a claim, which locks the matter into the current policy even if the suit arrives years later. Report those during the policy period, in writing, with dates and names.

In senior living the record is the defense. Charting, care plans, incident reports, call light logs and staffing schedules should be preserved the day an incident happens, and staff should not add to a chart after the fact. A defense lawyer can work with an imperfect record; an altered one usually ends the defense.

For managers, the file is the emails, the work orders and the renewal correspondence that show what the owner was told and when. Many professional forms require the insured's consent to settle, sometimes with a hammer clause that limits what the carrier pays if you refuse a settlement it recommends. We help clients report early and complete, and we stay involved through the claim.

The line is essential for two of the classes we write and relevant to others at the edges.

Senior living communities, from assisted living through skilled nursing carry professional liability from the first resident who receives care. Independent living with no care component has little of it, until a community starts offering medication reminders, bathing help or a licensed assisted living wing. Each step up the care spectrum changes the form, the rate and the sublimits, and a hospice or home health program run from the campus is a separate exposure to declare.

Property management firms running buildings for owners need errors and omissions because owners hold them to the management agreement, and many agreements require it by name with a stated limit. Firms that also procure insurance for their owners, oversee construction or handle association accounting carry more of it than firms that only lease units.

Owners who manage their own buildings have little professional exposure in this sense. Associations and their boards face a related but different claim, a decision that harmed a unit owner, which is answered by directors and officers coverage rather than by a professional form. If you are unsure which applies, send us the agreements and we will tell you.

• A retroactive date lost at a carrier change. A new policy written with a current retroactive date leaves every past resident or past building uncovered.
• No tail at a sale or a lost contract. Claims for earlier care or earlier management arrive after the policy that would have answered them has ended.
• An umbrella that does not schedule the professional policy. The most severe care claims stop at the primary limit.
• A shared aggregate. General and professional claims drawn from one limit, or one limit shared across many communities.
• An abuse sublimit nobody checked. The main limit looks adequate while the allegation most likely to produce a large verdict is capped far below it.
• Services outside the definition. A manager now handling construction or insurance for owners, or a community that added memory care, on a form that still describes the old operation.