Bankers Professional Liability (BPL) Insurance Definition & Meaning
Every type of insurance policy is intended to protect the policyholder should an unfortunate circumstance occur. The different types of policies can range depending on needs. For example, some protect against different errors, omissions, and negligence.
In the financial industry, one of the most common policies is the bankers professional liability insurance. Read on to learn more, including how it works, what it covers, and an example.
Table of Contents
- BPL is a banking insurance solution that protects people working for financial institutions. It covers instances of wrongdoing, errors, omissions, and mistakes.
- This insurance doesn’t cover criminal acts, violations of the law, fraudulent behavior, or invasion of privacy.
- Each BPL insurance policy is customized to cover the risks that a specific bank faces.
What is Bankers Professional Liability Insurance (BPL)?
Banker’s professional liability insurance provides protection for employees and officers within financial institutions against instances of negligence, errors, and omissions. It also protects against customers claiming misconduct. If a banker were to get sued, the insurance helps cover expenses related to any lawsuits and judgments if they don’t win against the plaintiff.
This form of insurance is also referred to as errors and omissions insurance (E&O).
What Does It Cover?
E&O insurance covers the traditional aspects of banking like deposits, wire transfers, and making loans. It can also cover more complex transactions surrounding fee-based services like brokerage, insurance, underwriting, and investments. Depending on the services that the financial institution offers and what risks they experience, the insurance solutions would be made to cover those specific risks. Those risks include:
- Allegations of financial wrongdoing
- Transposing numbers on a record
- Giving a client misleading or inaccurate advice
- Breach of duty
- Incorrect statements
Although plenty of instances fall under the BPL umbrella, there are also events that it doesn’t cover.
- Fraudulent or dishonest behavior
- Purposeful violations of the law
- Criminal acts
- Pending claims at the time of policy underwriting
- Invasion of privacy
Example of Banker’s Professional Liability Insurance
Let’s say that a financial institution is being sued by a customer for issuing cash and a credit card to a customer impersonator. This error allowed the criminal to cause damage to the customer’s credit history and wiped out the real customer’s bank accounts.
Obviously, the bank wasn’t intentionally releasing money to a customer impersonator so the bank insurance would cover the bank’s liability in this instance. Some insurance allows banks to choose their own legal representation while others provide the legal defense for them.
The lawyers they use might decide that a settlement is the best route based on the circumstance. If the insured bank refuses that then they may have a limited amount of trial expenses covered by the insurance provider.
BPL insurance protects banks from the mistakes that come along with traditional banking as well as more complex situations where a customer may choose to file legal action against the bank. There are situations that it covers and other situations that it doesn’t offer coverage.
FAQs About Bankers Professional Liability
What does professional liability insurance cover and not cover?
Professional liability insurance covers errors and omissions, breach of contract, professional negligence and failure to deliver a service on time. It doesn’t cover employee lawsuits of harassment or discrimination, bodily injury or property damage.
What does Bankers' professional liability cover?
It covers wrongdoing, errors, omissions, and mistakes.
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