1. Forms
2. PR
3. PR-03-01

What the form is

The PR 03 01 Deductible Liability Insurance endorsement is designed to introduce a deductible to certain professional liability insurance policies. Its primary function is to stipulate an amount that the insured must pay out-of-pocket for each covered incident before the insurance coverage begins to pay. The insurance company is responsible for the portion of the loss that exceeds the stated deductible.

Classes of business it applies to

This endorsement is specifically used in conjunction with other Professional Liability forms, namely PR 00 09 and PR 00 10. While these forms can apply to various professions, the inclusion of a deductible is particularly common and crucial in lines of business prone to high-value claims, such as medical professional liability. For example, a diagnostic testing laboratory (as suggested by one edition's title context) might use this endorsement on its liability policy to manage insurance costs.

Special considerations

• Per Incident Deductible: The deductible amount specified in the endorsement applies to each separate covered incident.
• Defense Obligations: Even with the deductible, the insurance company typically retains its right and duty to defend the insured against claims.
• Insurer's Right to Reimbursement: In some situations, an insurer might settle a claim and pay the full amount, including the deductible, to a third party. The insurer then has the right to seek reimbursement of the deductible amount from the named insured.
• Varying Deductibles: Some underlying coverage forms might have different insuring agreements, and this endorsement allows for deductibles to potentially vary by insuring agreement if so scheduled.

Key information for agents and underwriters

• Cost Control: The ability to add a deductible is a significant method for insurers to control financial risks and manage costs, especially in volatile lines of business like medical malpractice. It can make coverage more viable to offer.
• Risk Sharing: By having the insured bear the initial portion of a loss, it encourages risk management on the part of the insured and provides financial stability for the insurer.
• Pricing: The selection of a deductible level will impact the premium charged for the policy. Higher deductibles generally lead to lower premiums, but increase the insured's out-of-pocket expenses in the event of a claim.
• Underwriting Assessment: Underwriters will consider the financial capacity of the insured to meet the deductible obligations when offering this endorsement. The nature of the professional services (e.g., those covered under PR 00 09 or PR 00 10) will also be a key factor in determining appropriate deductible levels.