Personal Corporation Errors & Omissions Coverage

Your agent’s E&O insurance was intended to protect you from any legal action that might be brought against you. Under Common Law and the Civil Code (Quebec), professionals are held to a higher standard by virtue of their accreditation and training.

If you have set up a corporation under which you conduct your business, this entity could also be named in any action against you. If you have licensed agents other than yourself working in your entity (including licensed administrative assistants), your entity’s exposure to claims risk is higher. More clients also means greater exposure.

In certain circumstances, the ABS agent’s E&O coverage can be extended to cover your personal corporation.

Protection for “personal corporations” is included under the ABS program

When you purchase your individual coverage (A, B, C) with ABS, coverage for “Personal Corporation” is automatically included. This means that, if eligible, the agent’s personal corporation is considered to be an additional insured under the ABS agent’s E&O coverage.

However, not all corporations are the same; some, depending on their ownership structure, may not qualify for personal corporation coverage, and would therefore require separate corporate coverage.

Please read the information provided below to ensure your personal corporate entity falls under the definition of a personal corporation, as defined by the ABS Master Policy. If you are unsure, please contact us.

A personal corporation is defined as a corporation owned by the certificate holder, or jointly with their spouse, provided that such corporation does not conduct any business independent of the certificate holder, nor employs any other licensed or unlicensed agents.

Please refer to the master policy wording for actual policy definitions and for business activities covered.

A brief interpretation of what is and is not a personal corporation …

  • A licensed Life agent
  • A sole proprietor who operates under the trade name John Doe Financial Services
  • Qualifies as a personal corporation and can be added to his ABS plan agent’s E&O Certificate of Insurance as an additional insured
  • A licensed Life agent
  • A corporation through which she runs her life business, Jane Doe Insurance Ltd
  • Owns the company jointly with her husband, who is unlicensed
  • Qualifies as a personal corporation and can be added to her ABS plan agent’s E&O Certificate of Insurance as an additional insured
  • A licensed Life agent
  • A corporation through which he runs his life business, Jerry Doe Insurance for Life Inc, owned by a family trust
  • Does not qualify as a personal corporation because it is not owned by him solely or jointly with his or her unlicensed spouse

If your corporation isn’t eligible to be added as an additional insured, your entity has limited protection under your agent’s E&O coverage. In fact, the coverage for your firm is limited to “vicarious liability,” provided you’ve declared your firm on your agent’s E&O insurance application.

What is “vicarious liability”?

In Common Law and under the Civil Code, the doctrine of vicarious liability establishes that in an employer-employee or agency-agent relationship, the employer or agency may be held liable for the conduct of its employees, without proving actual negligence.

However, should a claim be brought against your entity alleging negligence (“direct” liability), such as allegations of negligent hiring, negligent supervision or training, your agent’s E&O policy won’t respond to defend your entity because this does not constitute vicarious liability. Neither will the policies carried by any of your employed or contracted agents respond for direct liability allegations. Also, where a licensed agent has left the entity, or where the agent has failed to maintain individual E&O coverage, and a suit is brought against the entity alleging negligence on the part of the former employee, your entity could be called upon by the courts to respond. Under these circumstances and many other situations, your agent’s E&O policy won’t respond to protect your entity. Any legal expenses or court awards would be borne entirely by your entity.

If your corporation is ineligible to be covered as an Additional Insured, we recommend consideration of a separate corporate E&O policy. For more information, please contact us.

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