Broad Form Company Liability

Prudent risk managers understand the need for Directors & Officers Liability insurance; however, D&O policies do not provide protection for the financial institution itself. If a lawsuit names an individual and the financial institution or just the financial institution, then judgments, settlements and defense costs are allocated between covered and uncovered parties. Since the law often imputes a greater duty to the corporate entity, the financial institution often bears the lion’s share of any loss. BFCL coverage was designed to cover claims against the financial institution resulting from a variety of sources.

Sources of Litigation

BFCL covers the financial institution for all of the professional services it offers including, but not limited to, lender, depositor, insurance and brokerage services liability. It also covers securities liability as well as suits brought by parties other than customers (third party liability).

We have compiled claims data over the past 20 years. Our data reveals that customer suits are the primary source of claims against banks followed by suits brought by third parties (including shareholders). Our BFCL was designed specifically to cover all of these primary exposures.

Third Party Liability coverage protects the institution from third party lawsuits stemming not only from customer relationships, but also from non-customer relationships such as other banks, vendors, business partners, etc.


Examples of Third Party Plaintiffs
≡ Beneficiaries and Spouses
≡
 Customer's Customers
≡ Custodians
≡ Contractors (construction loans)
≡ Other Banks (loan participations & collateral disputes)
≡ Vendors and Suppliers (contract disputes)
≡ Regulators and Shareholders

Third Party Liability coverage is only available via the BFCL Endorsement from ABA Insurance Services.

Covered Exposures
In addition to Third Party Liability, Broad Form Company Liability also covers Lender Liability, Depositor Liability,Securities Liability and Professional Services Liability.

≡ Lender Liability coverage provides protection for suits brought by borrowers, guarantors and other third parties. Claims result from inconsistent lending practices or negligence in the servicing, collecting, or restructuring of any extension of credit.
≡ Depositor Liability coverage is as important as Lender Liability coverage, but many banks do not realize the magnitude of the exposure. Over 30% of paid losses are related to Depositor Liability. Claims result from the bank honoring instruments with improper endorsements, erroneous asset transfers, and general account errors.
≡ Securities Liability coverage protects the bank from individual shareholder lawsuits, class action litigation and regulatory actions. Securities litigation, while infrequent, can be a costly source of claims against both directors and officers and the corporate entity.
≡ Professional Services Liability (Bankers Professional Liability) coverage protects the financial institution for losses involving professional services including, but not limited to, Brokerage Services, Insurance Services, Data Processing Services, Real Estate Services, Notary Services, and Miscellaneous Consumer Banking Services (including wire transfer services, credit card administration, the sale of travelers checks and money orders).

Availability
BFCL coverage is available to all banks that purchase D&O coverage. Coverage is available as a sublimit or as a separate limit of liability.