DEFINITION of 'Bankers Professional Liability (BPL) Insurance'

Financial protection for financial professionals against customers’ claims of wrongdoing. Bankers professional liability insurance is a type of errors and omissions insurance that protects those who work in the banking industry and the institutions they work for from the expenses associated with defending oneself in a lawsuit or paying a judgment if a plaintiff wins.

BREAKING DOWN 'Bankers Professional Liability (BPL) Insurance'

The term “banker” is broad in this context; bankers professional liability insurance may cover escrow agents, tax planners, financial planners, estate planners and more. Bankers liability insurance can cover directors, officers, full-time, part-time and seasonal workers in these professions.

A bank could be sued for a breach of duty, misleading statement, incorrect statement or other mistake related to its deposit, brokerage, insurance, real estate, credit card or other services. For example, a customer might sue a bank for honoring a fraudulent check or fraudulent wire transfer that caused funds to be erroneously removed from the customer’s account.

Bankers professional liability insurance does not cover fraudulent or dishonest behavior, deliberate violations of laws or other criminal acts. It also does not cover claims that are pending at the time the policy is taken out, nor does it cover libel, slander, defamation or invasion of privacy.

Bankers can purchase professional liability insurance policies tailored to the unique risks they face. For example, an investment banker would want coverage for underwriting, syndicating, securitizing and market-making activities, while a lender would want coverage for its activities related to granting, committing to, restructuring or terminating loans and lines of credit.

Some policies allow banks to choose their own legal defense, should the need arise; in other cases the insurance company will provide the legal defense. If the insurance company determines that a settlement is preferable to a trial and the insured refuses the settlement, coverage for trial expenses may be limited to the proposed settlement amount.

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