What Is Bankers Professional Liability (BPL) Insurance?

Bankers professional liability insurance (BPL) is protection for financial professionals and institutions against a customer's claims of wrongdoing, negligence, and errors and omissions. The coverage helps to offset the expenses associated with lawsuits or judgments should a plaintiff win. The structure of BPL is as professional liability coverage explicitly targeted to the banking and financial services sector and is also known as errors and omissions insurance (E&O).

Professional financial services include specific fee-based services including real estate, notaries, depository, insurance, and brokerage services.

BPL covers most real estate services except appraisal services.

Who BPL Insurance Protects

The term “banker” is broad in the context of professional liability insurance. BPL insurance may cover escrow agents, tax planners, financial planners, estate planners, and those in other positions within the financial industry. The coverage can include protection for those in the roles of directors and officers as well as covering full-time, part-time, and seasonal workers. Further, the addition of BPL may be allowed on director and officer liability (D&O) insurance. In some cases, the protection provided by the policy may extend to the assets of spouses and domestic partners of those insured through BPL.

More than 30% of lawsuits against banks are related to depositor relationships, according to ABA Insurance Services.

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. A lending institution would wish to cover its activities related to granting, committing to, restructuring, or terminating loans and lines of credit.

What Bankers Professional Liability Insurance Covers

Bankers professional liability insurance does not cover fraudulent or dishonest behavior, deliberate violations of the law, or other criminal acts. It also does not include claims which are pending at the time of policy underwriting, nor does it cover libel, slander, defamation, or invasion of privacy.

BPL insurance covers instances of and the allegation of financial wrongdoing. Events can be as unintentional as transposing numbers on a record or receipt to giving a client inaccurate or misleading advice. Lawsuits brought against a bank include breach of duty, misleading or incorrect statements, or other mistakes related to its deposit, brokerage, insurance, real estate, credit card, or other services.

Some policies may allow financial entities to determine their representation through a particular legal defense team—should the need arise. In other cases, the insurance company will provide the legal defense. If the insurance provider determines that a settlement is preferable to a trial and the insured refuses the agreement, coverage for trial expenses may be limited to the proposed settlement amount.

Key Takeaways

  • Bankers professional liability insurance protects financial professionals and institutions from customer claims of wrongdoing.
  • Coverage extends to costs associated with lawsuits or judgments.
  • BPL covers people within the financial industry including escrow agents, tax planners, financial planners, and estate planners.
  • BPL does not cover fraud or other dishonest behavior.

Real World Example

A hypothetical example includes a customer who files a suit against a bank for honoring a fraudulent check or allowing a fraudulent wire transfer. The error allowed funds to be removed in error from the customer’s account.