Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds.
THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
An Opinion on E & O Insurance for FAs
Dr. David Edward Marcinko MBA CMP™
www.CertifiedMedicalPlanner.org
[Publisher-in-Chief]
This post is not about medical malpractice liability insurance. As a doctor, financial advisor and insurance agent I have written and opined on this subject before; informally on this blog and more formally through our handbooks:
and, of course, pragmatically with clients: www.MedicalBusinessAdvisors.com
No, this post is about Errors and Omissions insurance for financial advisors.
About E & O Insurance for FAs
Like many physicians, most financial planners and advisors are confident that the way they practice minimizes the chance of being sued by a disgruntled [patient] client. And, perhaps that has been their experience so far. But just one arbitration case for a substantial claim can cost $10,000 or more, and a conventional lawsuit that goes to court with a jury trial will run about $50,000, even if it’s a totally bogus claim. With the cost of errors and omissions coverage for financial advisors now down to between $650 and $2,000 per year, it doesn’t make much sense to “go bare;” especially after the highly emotional 2008-09 debacle.
Historical Past
In years past, most financial planners opted to go without insurance because premiums on E&O policies ran about $7,500 -10,000 per year. Most of them should think again and take the same advice they give their clients—insure for catastrophic loss. We all know that when the stock market bubble finally bursts, there will be a lot of unhappy clients looking to recoup losses. What better time than now while things are good to put E&O coverage in place.
E & O Coverage
E&O policies cover errors, misstatements, negligence, breach of duty, and other wrongful acts, but fraudulent acts are usually not covered. Many major broker/dealers carry group coverage for the affiliated planners. Deductibles are typically $5,000 per planner and $20,000 for the firm. Policies are not standard—coverage can vary widely. Some cover insurance, some cover only securities, investment advisory and financial planning, and some cover other investment advice (e.g., real estate, franchises, etc.). Make sure the policy you buy covers what you actually do.
Claims-Made Policies
Be aware that these policies, like malpractice coverage, are on a “claims-made basis” rather than an “occurrence basis.” Therefore, prior acts are not usually covered unless the planner had continuous coverage with an insurer since the act was committed. As a result, it is essential to never permit a gap in coverage inasmuch as this could break the chain necessary for coverage of prior acts. So, this is where “tail coverage” comes into play; and it might be expensive!
Assessment
Experts point out that the biggest reason planners get sued is failure to diversify the client’s portfolio adequately. A fair [majority?] number of “financial advisors” are “one-product” sales people who always sell the product they know. This can be an expensive modus operandi. You only buy professional liability insurance because you cannot afford the consequences.
Note: “Minding Your Es & Os,” by Eric L.Reiner, Dow Jones Investment Advisor, February 1997, pp. 56–61, Dow Jones Financial Corp. [908] 389-8700)
Conclusion
And so, your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com and http://www.springerpub.com/Search/marcinko
Our Other Print Books and Related Information Sources:
Health Dictionary Series: http://www.springerpub.com/Search/marcinko
Practice Management: http://www.springerpub.com/product/9780826105752
Physician Financial Planning: http://www.jbpub.com/catalog/0763745790
Medical Risk Management: http://www.jbpub.com/catalog/9780763733421
Physician Advisors: www.CertifiedMedicalPlanner.org
Subscribe Now: Did you like this Medical Executive-Post, or find it helpful, interesting and informative? Want to get the latest ME-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.
Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos
Share this:
Filed under: "Advisors Only", CMP Program, iMBA, Inc., Op-Editorials, Professional Liability | Tagged: broker/dealers, CMP, david marcinko, E & O Insurance for FAs, www.certifiedmedicalplanner.com, www.medicalbusinessadvisors.com |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Arbitration Claims
According to Financial Advisor Publications, the number of arbitration cases handled by FINRA have “see-sawed” in recent years: 4,982 in 2008, up to 7,137 in 2009 and back down to 5,680 in 2010.
The most common investor claims are (1) breach of fiduciary duty, (2) negligence, (3) fraud/misrepresentation, (4) failure to supervise and (5) breach of contract.
Dr. David Edward Marcinko MBA
[Publisher-in-Chief]
LikeLike
Failure to Report Test Results Increases Malpractice Risk
Failure to communicate diagnostic test results increasingly puts physicians at greater risk for medical malpractice claims, researchers report in the November 2011 issue of the Journal of the American College of Radiology (JACR).
Taking advantage of available “semi-automated critical test result management systems” could improve patient safety, shorten hospital stays, and reduce risk by providing legal documentation.
“When reportable test results arise, healthcare organizations need clear policies that define the responsibility of reporting and referring providers to ensure patient follow-up,” the authors wrote in the report that JACR cited as CME Activity of the Month.
“Recently developed technology may help healthcare providers reduce the incidence of missed notifications.”
Source: Larry Hand, Medscape News [11/4/11]
More: http://www.amazon.com/Insurance-Management-Strategies-Physicians-Advisors/dp/0763733423/ref=sr_1_3?ie=UTF8&s=books&qid=1275315795&sr=1-3
LikeLike
Malpractice Trends: Good News and Bad News
Results of a new study of medical malpractice claims offer a mix of reassurance and sobering reality. According to the results, 55.2% of medical malpractice claims that required some defense cost led to litigation. However, of the claims that do go to court, most are ultimately decided in the physician’s favor. For physicians, that is the good news.
The sobering news is that litigated claims often take months or years to be resolved, according to the study, which was published online May 14 in the Archives of Internal Medicine. Dealing with malpractice claims is often a lengthy process, according to the study results. The mean time required to resolve claims was 19.0 months, which included 11.6 months for nonlitigated claims and 25.1 months for claims that were litigated.
Source: Steven Fox, Medscape News via Arch Intern Med. [5/14/12]
LikeLike
Bare Hospitals?
In July 2012, the New York Times reported that some hospitals in New York are dropping their malpractice insurance because they can’t afford it any longer, and they may not have enough money set aside to pay judgments against them.
The hospitals use the fact that they have little money to pay out as negotiating leverage. The hospitals tell plaintiffs to either take what little is offered as a settlement or risk getting nothing if the hospital goes bankrupt and closes.
http://www.kevinmd.com/blog/2013/01/hospitals-learning-lawyers.html
Maybe the hospitals are learning from the lawyers. What about us physicians? Will we ever learn?
Dr. Nikita
LikeLike
The Cost of What Surgeons Leave Behind
Thousands of patients a year leave the nation’s operating rooms with surgical items in their bodies. And, despite occasional tales of forceps, clamps and other hardware showing up in post-operative X-rays, those items are almost never the problem.
Most often, it’s the gauzy, cotton sponges that doctors use throughout operations to soak up blood and other fluids, a USA Today examination shows. But, it can be more … and it can cost more.
http://www.usatoday.com/story/news/nation/2013/03/08/surgery-sponges-lost-supplies-patients-fatal-risk/1969603/?utm_source=Copy+of+3.7.13&utm_campaign=11713&utm_medium=email
Going Bare – I don’t think so.
Dr. Barre
LikeLike