Community banks may face allegations of negligence in representing the quality of its investments. This can certainly be grounds for a lawsuit. By offering poor financial advice to customers they face the further likelihood of being sued. These types of claims often can go on for quite some time, and the result is a costly trial because it becomes time-consuming to defend.
A BPL liability policy (Liability insurance for bankers) can provide the right coverage against claims arising from allegations of wrongful acts, along with any errors or omissions in the performance of professional services by the community bank or any of its employees. This coverage can often be expanded to include lender liability, trust services or vicarious liability for services that a community bank may provide through a third party.
Fiduciary liability another main concern
Community banks should also protect themselves from financial liability due to the administration of pension and welfare plans. Fiduciary liability coverage offers bankers protection against common exposures related to managing and administering these plans, including Employee Retirement Income Security Act violations, or losses that may be incurred as a result of alleged errors, omissions or breach of fiduciary duties.
Professional liability policies for community banks have become increasingly complex in recent years. It’s important for brokers to not only educate themselves about these coverages, but also conduct a thorough review of these policies in conjunction with a bank’s other coverages, which may include property/casualty, general liability, employment practices liability and others to identify any gaps that may leave the door open to potential risks. While no single policy provides a one-size-fits-all solution, brokers should strive for having well-rounded coverage for their clients in the community banks industry.
Unlike general liability coverage, professional liability policies are “claims-made,” which means that they’re triggered when a lawsuit or a written demand for monetary relief is filed, as opposed to when an act occurred. Brokers must be made aware of this critical distinction as well as be able to explain it to their community banking customers when the issue comes up.