Bankers Professional Liability (BPL): What It is, How It Works
Bankers professional liability insurance (BPL) protects financial professionals and institutions from client claims of malfeasance, carelessness, and mistakes and omissions. If a plaintiff wins a lawsuit or receives a judgment, the coverage helps to pay the expenses. BPL is structured as professional liability coverage specifically designed for the banking and financial services sector, and it is sometimes known as errors and omissions insurance (E&O).
Professional financial services include fee-based services such as real estate, notary, depository, insurance, and brokerage.
Who BPL Insurance Protects
In professional liability insurance, the term "banker" has a broad meaning. BPL insurance may cover escrow agents, tax planners, financial planners, estate planners, and other financial professionals. The coverage may include protection for directors and officers, as well as full-time, part-time, and seasonal employees. Furthermore, the addition of BPL may be permitted on director and officer liability (D&O) insurance. In some situations, the policy's protection may extend to the assets of the insured's wives and domestic partners through BPL.
Bankers can acquire professional liability insurance plans that are tailored to the specific risks they encounter. An investment banker, for example, would want coverage for activities such as underwriting, syndicating, securitization, and market making. A lending institution would like to cover the actions associated with providing, committing to, restructuring, or terminating loans and lines of credit.
What Bankers Professional Liability Insurance Covers
Bankers' professional liability insurance does not cover fraudulent or dishonest actions, willful violations of the law, or other criminal activities. It also excludes claims that are still pending at the time of policy underwriting, as well as libel, slander, defamation, and invasion of privacy.
BPL insurance covers occurrences and allegations of financial malfeasance. Unintentional events might range from transposing numbers on a record or receipt to offering a client incorrect or misleading information. Breach of duty, misleading or erroneous representations, or other errors relating to a bank's deposit, brokerage, insurance, real estate, credit card, or other services are all grounds for a lawsuit.
Some policies may allow financial entities to choose a specific legal defense team if necessary. In other circumstances, the insurance company will handle the legal defense. If the insurance company determines that a settlement is preferable to a trial and the insured refuses to accept, payment for trial expenses may be restricted to the suggested settlement amount.
Real World Example
A hypothetical example is a consumer who sues a bank for accepting a counterfeit check or allowing a fraudulent wire transfer. The issue caused monies to be mistakenly removed from the customer's account.