Working PIby Isaac Peck, Senior Broker at OREP.org
Private investigators in roughly a dozen states are required by their licensing authority to carry general liability insurance to keep their licenses in good standing. For example, Virginia requires private investigators to carry $1 million of general liability coverage as a requirement of licensure. Georgia is another.
As a result of many states’ general liability insurance requirements, some private investigators choose to carry general liability only policies and forgo errors and omissions (E&O) coverage.
This creates a significant coverage gap for a private investigator’s business.
Here’s why that happens and how to fix it.
What Is General Liability?
As a quick recap, general liability (GL) covers you primarily for bodily injury and property damage (BIPD) claims during the course of your operation. In other words, if it is alleged that someone got hurt or property was damaged because of your actions, then the GL policy should respond.
GL is carried by most physical professions (security guards, contractors, electricians, etc.) as well as most retail establishments like Little Caesars, Walgreens, etc. GL is typically the policy that provides the core “slip and fall” liability coverage if you have a physical office that clients visit, and they trip and break their leg. (This happens frequently at big-box retailers!)
E&O coverage, also called professional liability insurance, covers you for mistakes—errors and omissions—that you make in your professional capacity as a private investigator. In other words, a mistake in the services provided. This type of insurance is very common for providers of professional services, including lawyers, doctors, real estate appraisers, architects, engineers and so on.
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What’s the Problem?
The problem for PIs who carry only general liability insurance is twofold:
1. Many general liability policies actually exclude coverage for any claims that arise from the performance of professional services.
2. The PI won’t have coverage for any E&O related claims.
Consider that first point. What does it mean for an insurance policy to exclude claims that arise from the performance of professional services?
Check out Figure 1 below for an endorsement of a general liability insurance policy issued by an online Insurtech offering “fast and cheap” coverage for PIs.
Figure 1: Example of an endorsement that excludes insurance coverage for claims that arise from the performance of professional services.
Enlarged Image
Specifically, the endorsement excludes: Injuries, damages, claims, “suits,” actions or proceedings arising out of any “wrongful act” committed by the insured, or by any person for whom the insured is legally liable, and arising out of the rendering or failure to render “professional services” in the conduct of the insured’s business.
In other words, any claim against you or an injury you might cause that stems from your rendering professional services is excluded.
But wait … as a private investigator, aren’t all of the services you provide professional? If so, one might wonder how much coverage, if any, this policy actually provides.
Dealing with the second point, PIs who carry general liability only policies don’t have coverage for any claims they might face alleging negligence in their duties or failure to perform.
Here are a two real-life examples of E&O related claims we’ve seen in lawsuits against investigators:
Preservation of Evidence: An accident investigation firm was hired to investigate an explosion on a drilling rig and a fire at a thrift store. In both cases, the PI firm “failed to preserve the evidence,” causing their clients to be found guilty of “spoliation of evidence” and severely prejudicing their client’s ability to defend themselves. The PI firm was subsequently sued.
Negligence: This a broad claim, and we’ve seen suits that range across the spectrum, including (A) overpromising the outcome of services, (B) failing to report important information in an investigation, (C) reporting incorrect information in an investigation, and/or (D) performing poorly in an investigation. For any case in which a poor, incomplete or inaccurate investigation causes financial (or emotional) harm to a client or any stakeholder, the PI may have a liability exposure relating to their professional services,i.e., E&O insurance exposure.
What’s the Solution?
These two significant coverage gaps for PIs who carry only general liability highlight the necessity for investigators to carry both GL and E&O coverages.
The good news for PIs is that several insurance programs offer a combination E&O and general liability policy that provides both of these coverages. In an environment where general liability policies exclude claims related to the “rendering of professional services,” choosing a policy that provides professional and general liability coverage on one policy form is a way to reduce the risk that your coverage will be denied and ensure you’re protected.
And the price is not significantly more expensive than a standalone general liability policy either! Private investigator insurance has become incredibly affordable over the last five years. Many standalone GL policies are $400-$700. With OREP’s program, for example, minimum premiums for the E&O and GL combination policy start within that exact same range. Private investigators don’t have to pay (much) more to be covered properly.
I hope this advice helps keep you and your business safe. If you ever have any liability- or insurance-related questions, please reach out to me at isaac@orep.org. Here’s to your success!
About the Author
Isaac Peck is the Publisher of Working PI magazine and the President and Senior Broker of OREP.org, a leading provider of liability insurance for PI professionals. Working PI is the most widely read print magazine for investigators nationwide, reaching over 25,000 PIs. Investigators who become OREP Members enjoy two 7-hour CE courses at no charge (Visit OREP.org/PI-Members for details). Isaac brings over 10 years of experience leading teams in Professional Liability insurance underwriting, operations, technology, and marketing—with a focus on E&O and general liability insurance for professionals. He holds a Master’s Degree in Accounting. Reach Isaac by phone at (888) 347-5273 or by email at isaac@orep.org. CA License #4116465.
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