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E&O insurers should take an interest in inquests, disciplinary hearing “sideshows”


October 29, 2010   by Canadian Underwriter


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Insurers defending professionals should be aware of inquest or disciplinary hearings involving insureds, even if these ‘sideshow’ proceedings are not covered under E&O policies, because of the potential impact the proceedings may have on a subsequent civil action that does come under the E&O policy.
Jamie Trimble of Hughes Amys LLP raised the issue of the need to pay attention to inquests and disciplinary hearings at The ARC Group of Canada’s 5th Annual Seminar & Cocktail Reception on Oct. 28 in Toronto.
“There are some professional liability policies that do grant some defence costs relief to the insured, presumably because that insurer recognizes that the impact of the disciplinary hearing, or whatever ‘sideshow’ it is, will come back to haunt them on the civil action side.”
Disciplinary hearings are tricky for E&O insureds, Don Dear of McLennan Ross LLP noted, for at least three reasons:
• the standards of regulatory bodies differ with each profession and territory;
• sometimes people sitting in judgment on behalf of self-regulated professional bodies are tougher on peers appearing before them; and
• evidence and testimony made public at the inquest or disciplinary hearings can sometimes find their way into future trials.
With these things in mind, Trimble asked Chris Rain, vice president of claims at Arch Insurance, if insurers should take an interest in these hearings because of their potential future effects on an insured’s E&O policy.
“Absolutely,” Rain responded. “If there isn’t coverage in the policy [for inquests or disciplinary proceedings], we’re going to want to talk to our insureds and say: ‘Do what you need to do as if you weren’t insured, we can’t really fault you for that.’
“But it would make sense, and we could talk to our superiors and discuss this with them, that it would be a benefit to the policy [to take an interest in the hearing] because it’s inevitably going to go the distance and in the long run save us quite a bit of money.
“It’s something about which we would have a discussion with our insureds beforehand.”