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ISO's Professional Liability Forms

Author: Chris Boggs

Effective June 1, 2017, Insurance Services Office (ISO) introduced the new Miscellaneous Professional Liability Policy (MI 00 01) along with a multitude of endorsements. This is the first in a series of insurance programs designed to address the professional liability needs of various risk types. These new forms are housed in Division Sixteen – Professional Liability – Other Than Medical of the ISO Commercial Lines Manual.

This first Miscellaneous Professional Liability filing was developed to provide professional liability coverage for various types of operations including:

  •     Advertising Services
  •     Answering Services/Call Center
  •     Appraisal Services (Non-real Estate)
  •     Career Counseling
  •     Concierge Services
  •     Corporate Trainer
  •     Court Reporting
  •     Document Preparation Services
  •     Event Planners
  •     Interior Designers (Non-structural)
  •     Life Coaching Services
  •     Notary Services
  •     Paging Services
  •     Photography Services
  •     Printing Services
  •     Private Investigator/Investigative Services
  •     Process Servers
  •     Resume Services/Consulting
  •     Salon Services
  •     Seminar Conductors
  •     Staffing Agency
  •     Tax Preparers
  •     Tour Operators
  •     Translating/Interpreting Services (Non-medical)
  •     Translating/Interpreting Services (Medical)
  •     Travel Agents
  •     Tutoring Services
  •     Not Otherwise Classified (NOC)

When Not Otherwise Classified (NOC) is used, the MI 10 01 and the MI 10 03 endorsements allow the insured to specifically list one or more professional services intended to be covered. Services eligible for under NOC seem to be quite broad with a few specifically listed ineligible operations which include:

  • Accountants,
  • Agricultural professions,
  • Architects, engineers or surveyors,
  • Contractors,
  • Insurance agents or brokers,
  • Investment advisors,
  • Lawyers,
  • Medical professionals, and
  • Real estate agents or brokers.

Some carriers may have their own lists of ineligible operations in addition to these business classes.

The Base Coverage Form

Coverage is provided on a claims-made and reported basis, meaning that the claim must be made against the insured and reported to the insurer during the policy period or extended reporting period. The base policy is divided into 11 sections.

Section I extends coverage on a "pay on behalf" basis, in excess of any retention, when the insured is charged with a "wrongful act" occurring after the retroactive date. A "wrongful act" is defined to mean any actual or alleged act, error, misstatement, misleading statement, omission, neglect, breach of duty committed, attempted, or allegedly committed or attempted solely in the performance of or the failure to perform "professional services." The professional service covered by the policy is the service included in the policy's declarations.

Section II addresses the Limit of Liability limiting the total amount of coverage for the policy period to the aggregate limit listed in the declarations. Individual claims are subject to the Each Claim Limit, also listed in the declarations. In the unendorsed form defense cost is within the coverage limits. Two defense limits endorsements are also available:

  • Limit of Liability Amended – Additional Defense Costs Limits (MI 03 03): Allows for a specified amount of additional defense cost coverage if the aggregate limit has been exhausted. Until the aggregate is exhausted, defense is still within the limits; or
  • Limit of Liability Amended – Defense Costs Outside Limit of Liability (MI 03 04): As the name suggests, defense costs do not reduce the available limit when this endorsement is attached.

Section III applies to Defense and Settlement. The policy states that the insurer has the right and duty to defend and as part of this right and duty can select defense counsel. However, the carrier's right to select defense counsel can be altered by endorsement MI 04 01. This endorsement allows the insured to approve or disapprove the choice of counsel. When the MI 04 01 is attached, the MI 07 05 endorsement is attached placing specific conditions on the insured's choice of counsel. The insurance carrier's duty to defend ends when the limit of insurance has been exhausted.

The Settlement provision gives the insurance carrier the right to negotiate and settle a claim, but only with the consent of the insured. The Consent to Settle provision (often called the "hammer clause) states that if the insured does not settle, they become a 50 percent "coinsurer" on all amounts above the agreed to settlement amount and defense costs incurred after the date the settlement was agreed to by the injured party.

Essentially, if the insured refuses to settle, 50 percent of any damages awarded in addition to the agreed to settlement amount are the responsibility of the insured. Further, the insured must pay 50 percent of the defense costs incurred after the proposed settlement date. Consider the following chart:

Amount on Date Settlement AcceptedAmount Ultimately PaidInsured's Responsibility (Out of Pocket Cost) – 50%
Damages: $100,000$180,000$40,000
Defense: $60,000$120,000$60,000

The Consent to Settle "coinsurance" percentage can be altered (increased) by endorsement (MI 04 02). In the above example, if the coinsurance percentage is increased to 70 percent, the insured's out-of-pocket costs drop to $42,000 from the $100,000 at 50 percent coinsurance.

Section IV details the retention, stating that only amounts in excess of the retention are paid by the carrier. Retention amounts are basically the first "layer" of protection and are borne solely by the insured. Defense costs are subject to the retention only when defense is within the limits (as it is in the unendorsed form). If the MI 03 04 is attached, defense costs are not subject to the retention.  The basic retention is $2,500, but can be lowered to $250 or increased to $1 million.

Section V, entitled "Related Claims," states that all claims arising out of the same wrongful act or combination of interrelated wrongful acts are considered one claim and are thus subject to one retention (the good part) and one claim limit (the restrictive part). An interrelated wrongful act is defined to mean "all causally connected 'wrongful acts' arising out of the same or substantially the same facts, circumstances or allegations which are the subject of or the basis for any 'claim.'"

Section VI details Coverage Enhancements. This provision includes: 1) Separate limits for the defense of Disciplinary and Licensing Proceedings and Subpoena Assistance; and 2) Up to $500 per day for loss of earnings for each insured person with an aggregate limit of $10,000. These payments do not reduce the Aggregate Limit of Liability and are not subject to a retention.

Section VII, entitled Coverage Extension, can be seen as a vicarious Who Is An Insured section. The form states, "Coverage shall be extended to 'claims' for 'wrongful acts' of an 'insured person' made against:

  1. The lawful spouse or domestic partner of such "insured person" solely by reason of such spouse or domestic partner's status as a spouse or domestic partner, or such spouse or domestic partner's ownership interest in property which the claimant seeks as recovery for an actual or alleged "wrongful act" of such "insured person"
  2. The estate, heirs, legal representatives or assigns of such "insured person" if they are deceased, or the legal representatives or assigns of such "insured person" if they are legally incompetent, insolvent or bankrupt; or
  3. A trust of such "insured person" and any legally approved trustees of such trust."

But note, coverage is not extended for those listed individual acts, only for their vicarious liability for the actions of the insured.

To complete the policy picture, Section VIII lists the 22 policy's exclusions; the policy's Conditions are found in Section IX; and Extended Reporting Periods and the Run-Off Coverage Period are in Section X. The policy's final section, Section XI, defines specific terms.

A unique provision is the Run-Off Coverage Period in Section X. The insured has the option to purchase up to six years of "run-off" coverage in the event of a merger, consolidation or acquisition of the named insured or cessation of a subsidiary.

Loss Costs, Revenue Bands and Forms

Loss costs are based on per $1,000 of revenue and drops as revenues increase. The revenue bands are:

  • $0 - $250,000
  • $250,001 - $500,000
  • $500,001 - $1,000,000
  • $1,000,001 - $3,000,000
  • $3,000,001 - $5,000,000
  • $5,000,001 - $10,000,000
  • $10,000,001- $15,000,000
  • $15,000,001 - $25,000,000
  • $25,000,001 - $50,000,000
  • $50,000,001 - $100,000,000
  • >$100,000,000

Premiums are developed by charging the rate of each band until the ultimate premium is reached. As an example, consider the method for developing the premium for an operation with $6,500,000 in revenues. For this assumption, loss costs are fabricated and Risk Hazard Groups are ignored (there are five risk hazard groups ranging from "Very Low Risk" to "Very High Risk"):

Revenue BandLoss Cost (Rate) ExampleExample Premium
$0 - $250,000$5.00$1,250
$250,001 - $500,000$4.00$1,000
$500,001 - $1,000,000$3.00$1,500
$1,000,001 - $3,000,000$2.00$4,000
$3,000,001 - $5,000,000$1.00$2,000
$5,000,001 - $6,500,000$0.50$750
Total Premium$10,500

Remember, these numbers are completed made up solely for the example; also, other key rating factors are not considered (such as hazard group, increased limits, deductibles, etc.).

In total, ISO introduced 82 policy forms and endorsements as part of this new filing. Following is the complete list of all the forms and endorsements:

Form NumberForm Title
MI 00 01 06 17Miscellaneous Professional Liability Policy
MI DS 01 06 17Miscellaneous Professional Liability Policy Declarations (Advisory)
MI AP 00 06 17Application For Miscellaneous Professional Liability Insurance (Advisory)
MI AP 01 06 17Application For Miscellaneous Professional Liability Insurance – Advertising Services Supplement (Advisory)
MI AP 02 06 17Application For Miscellaneous Professional Liability Insurance – Printers Supplement (Advisory)
MI AP 06 06 17Application For Miscellaneous Professional Liability Insurance – Salons Supplement (Advisory)
MI AP 07 06 17Application For Miscellaneous Professional Liability Insurance – Staffing Agency Supplement (Advisory)
MI AP 08 06 17Application For Miscellaneous Professional Liability Insurance – Travel Agents And Tour Operators (Advisory)
MI 02 01 06 17Advertising Services
MI 02 02 06 17Answering Services And Call Centers
MI 02 03 06 17Concierge Services
MI 02 04 06 17Document Preparation Services
MI 02 05 06 17Life Coaching Services
MI 02 06 06 17Photography Services
MI 02 07 06 17Printing Services
MI 02 08 06 17Printing Services – Covered Costs Sublimit
MI 02 09 06 17Salon Services – Bodily Injury Sublimit
MI 02 10 06 17Translator Or Interpreter Services
MI 02 11 06 17Translator Or Interpreter Services – With First Aid And Medical Services Sublimit
MI 02 12 06 17Travel Agents And Tour Operators
MI 03 01 06 17Covered Costs Sublimit
MI 03 03 06 17Limit Of Liability Amended – Additional Defense Costs Limit
MI 03 04 06 17Limit Of Liability Amended – Defense Costs Outside The Limit Of Liability
MI 03 05 06 17Limit Of Liability Amended – Increased Limit Of Liability
MI 03 06 06 17Limit Of Liability Amended – Specific Project Limit
MI 04 01 06 17Defense And Settlement Amended – Counsel Selection
MI 04 02 06 17Defense And Settlement Amended – Settlement
MI 05 01 06 17Computer Consulting And Programming Services Exclusion
MI 05 02 06 17Failure To Disclose Compensation Exclusion
MI 05 03 06 17Failure To Obtain Consent Or Authorization Exclusion
MI 05 04 06 17Material Published With Knowledge Of Falsity Exclusion
MI 05 05 06 17Interruption Or Failure Of Services Exclusion
MI 05 06 06 17Invalid Or Unobtained License Exclusion
MI 05 07 06 17Investment Performance Exclusion
MI 05 08 06 17Notary Services
MI 05 09 06 17Nuclear Energy Liability Exclusion Endorsement (Broad Form)
MI 05 10 06 17Other Position Or Capacity Exclusion
MI 05 11 06 17Professional Services Exclusion
MI 05 12 06 17Promotional Activities And Contests Exclusion
MI 05 13 06 17Quality Or Performance Of Goods – Failure To Conform To Statements Exclusion
MI 05 14 06 17Sale Or Purchase Of Insurance Exclusion
MI 05 15 06 17Specific Litigation Or Other Incident Exclusion
MI 05 16 06 17Specific Person Or Entity Exclusion
MI 05 17 06 17Tax Services And Investment Performance Exclusion
MI 05 18 06 17Tax Services Exclusion
MI 05 19 06 17War Exclusion
MI 05 20 06 17Failure to Provide Timely Services Exclusion
MI 06 01 06 17Bodily Injury Sublimit
MI 06 02 06 17Bodily Injury Or Property Damage Sublimit
MI 06 03 06 17Business Enterprise Exclusion Amended
MI 06 04 06 17Fraudulent, Criminal, Malicious, Dishonest Or Intentional Acts Exclusion Amended – Organization Imputation
MI 06 05 06 17Fungi Or Bacteria Exclusion Deleted
MI 06 06 06 17Fungi Or Bacteria Sublimit
MI 06 07 06 17Intellectual Property Exclusion Amended
MI 06 08 06 17Property Damage Sublimit
MI 06 09 06 17Recording And Distribution Of Material In Violation Of Law Sublimit
MI 06 10 06 17Recording And Distribution Of Material In Violation Of Law – Each Claim Defense Costs Sublimit
MI 07 01 06 17Conditions Amended – Binding Arbitration
MI 07 02 06 17Conditions Amended – Nonbinding Arbitration
MI 07 03 06 17Conditions Amended – Calculation of Premium
MI 07 05 06 17 Conditions Amended – If You Are Permitted To Select Defense Counsel
MI 07 06 06 17Conditions Amended – Merger Or Acquisition Of Named Insured – Waiver Of Automatic Run-Off
MI 07 07 06 17Conditions Amended – Non-Stacking Of Limits
MI 07 08 06 17Conditions Amended – Premium Audit
MI 07 09 06 17Conditions Amended – Reliance On Other Insurer's Application
MI 07 10 06 17Conditions Amended – Retention Offset – Mediation Or Binding Arbitration
MI 07 11 06 17Conditions Amended – Territory (U.S., U.S. Territories and Possessions, Puerto Rico and Canada)
MI 07 12 06 17Conditions Amended – Waiver Of Subrogation
MI 07 13 06 17Conditions Amended – Waiver Of Subrogation – Client Specific
MI 08 01 06 17Additional Extended Reporting Period – Elected
MI 08 02 06 17Run-Off Coverage Period – Elected
MI 09 01 06 17Definition Of Damages Amended – Punitive Damages Excluded
MI 09 02 06 17Definition Of Insured Amended – All Persons Or Entities Required To Be Added By Contract
MI 09 03 06 17Definition Of Insured Amended – Independent Contractors
MI 09 04 06 17Definition Of Insured Amended – Specific Person Or Entity
MI 09 05 06 17Definition Of Insured Amended – Specific Person Or Entity – Only For Wrongful Acts Of The Organization
MI 09 06 06 17Definition Of Insured Amended – Specific Person Or Entity – Services Performed At The Direction Of The Organization
MI 09 07 06 17Definition Of Organization Amended – Predecessor Organization
MI 10 01 06 17Additional Professional Services
MI 10 02 06 17Policy Changes
MI 10 03 06 17Professional Service Description
MI 10 04 06 17Specific Project Coverage

Last Updated:
  June 23, 2017

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