Bankers Professional Liability (BPL) Insurance Definition & Meaning

KEY TAKEAWAYS

• BPL is a banking insurance solution that protects people working in the financial industry. It covers losses incurred as a result 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 coverage (E&O).

What Does It Cover?

E&O insurance covers the traditional aspects of banking like deposits, wire transfers, and providing loans. It can also cover more complex transactions like brokerage, insurance, underwriting, and investments. Depending on the services that the financial institution offers and what risks they are exposed to, the insurance solutions would cover those specific risks. Those risks include:

• Allegations of financial wrongdoing
• Transposing numbers on a record
• Giving a client misleading or inaccurate advice or information 
• Breach of duty
• Incorrect statements

Although plenty of instances fall under the BPL umbrella, there are also events that are not covered:

• Fraudulent or dishonest behavior
• Purposeful violations of the law
• Criminal acts
• Pending claims at the time of policy underwriting
• Invasion of privacy
• Libel
• Slander
• Defamation 

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 (stolen identity). This error allowed the criminal to cause damages to the customer’s credit history and emptied the actual 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 then they may have a limited amount of trial expenses covered by the insurance provider.

Summary

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 specific events that it covers and other situations that are not included in the coverage

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.