E&O insurance products struggle to keep pace with BV profession?

“I have both the CBA and the AVA, with the CMA accounting credential,” reports a respondent to our recent survey on errors and omissions (E&O) insurance among BV firms and practitioners. “I provide a full range of valuation services, plus extensive consulting on fully transacted sales (both internal and external). Because I am not a CPA, no coverage for the full range of my practice is available to me. What IS available is quite expensive and covers only a tiny fraction of what I do.” Says another survey participant (who didn’t cite his/her professional affiliation): “I've been looking, but can't find anything that seems to be focused on our industry as BVs.”

By comparison, one CPA-participant recommends, “CPA's should go with the AICPA policy. They continuously improve the coverage and risk management annually, have seminars and [other forms of continuing education]” through the Aon track. Similarly, “CNA is great,” said another respondent. “Good cost, good coverage and they have many other add-ons.” Keys to successful protection are also “using engagement letters, having good restrictions on distribution to third parties, liability caps, and indemnification clauses,” says this commentator. “Also, the guidance that I have been provided is when you don't make your engagement letter a one-way street and Draconian there is a higher chance of courts enforcing it and maintaining its provisions/terms.” In other words—be sure your engagement letter has the best chances of becoming a bilateral contract by having the client review and sign it.

Overall, 50% of those who answered the question said they took advantage of the AICPA’s insurance option. Only a fifth (16.7%) subscribe to the ASA’s BV Professional Liability via Murray Insurance, while the same proportion (16.7%) said they used Camico and another 16.7% listed some “other” option (one simply cited “Philadelphia.”) On average, respondents pay approximately $4,000 in annual E&O premiums, with an annual deductible of nearly $22,000, for a maximum annual coverage per incident of roughly $1.57 million.