Protection for “personal corporations” is included under our E&O program
When you purchase your individual coverage (A, B, C), coverage for “Personal Corporation” is automatically included. This means that, if eligible, the agent’s business is considered to be an additional insured under the 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 here to ensure your personal corporation conforms to the APA Master Policy. If you are unsure, please contact the APA member service team.
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, but only with respect to its liability as it might arise out of the certificate holder’s activities specified as covered elsewhere in the policy.
Please refer to the master policy wording for actual policy definitions and for business activities covered.
If your corporation isn’t eligible to be added as an additional insured, your firm 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 firm 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 firm 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 firm, or where the agent has failed to maintain individual E&O coverage, and a suit is brought against the firm alleging negligence on the part of the former employee, your firm 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 firm. Any legal expenses or court awards would be borne entirely by your firm.
Where your corporation is ineligible to be covered an additional insured, we recommend consideration of a separate corporate E&O policy. We have solutions for firms like yours.