Discussion:Cpa liability insurance coverage

Do you do it as a multiple of your revenue? say 2x annual or more. I know there are a lot of factors. In my case i do one small corp audit approx 2% of revenue. Sole practioner. just curious as i am about to renew.

thanks,

Nothing a lawyer likes more than high policy limits. It's a real motivator. Keep that in mind.

I would like to have some just to sleep at night but it is prohibitively expenses.

If I carried 2x revenue...well that's only $8.50....why are the premiums they want to sell me $500 a year! :D

Michael

Now, you don't tell the client that. You ask the client happened, let him cry on your shoulder, etc. etc. But in truth, the lawyer cannot afford to take a case with low policy limits (or no insurance at all). It's the same work whether you end up with a 50K case or a 500K case, only the numbers change.

So, theoretically, an accountant with high policy limits is a juicy target, and I think that's Dale's point as well.

In some cases, you may be in a position where you can't lower your coverage, even if you want to. Some corporations will require that you show them your Dec. page and prove you have a certain amount of insurance.

P.S. now the agent will tell you they will take your house, jewelry and all that. That is extraordinarily rare. You want cash at the end of a case. You don't want to chase around trying to collect a judgment in a tort case.

I also have a small practice, with a total of 40 individual returns, 5 extensions, and 6 S corps prepared this year. I also have 3 clients I do monthly accounting and payroll for. I bought professional insurance from Landy Insurance for $147 for the entire year. My limit is $100,000. I also have an LLC but I figured for $147 the extra protection wouldn't hurt.

Christine

Getting down to brass tacks, and probably only CrowJD can answer since he is also an attorney (my attorney at law business cards haven't arrived yet or else I would start making things up! :D). Most of the basis for lawsuits are generally damages and most civil suits tend to seek to make one person 'whole'.

Let's say that I really screw something up and cause a client to show that he/she had a refund of $3,000 when they really owed $3,000. Stipulating that I pay the interest and penalties (but not the original tax) was the client not made whole? What are the damages they could seek? Not being a smart arse, seriously asking for a legal basis upon which they might be able to continue an action.

I am thinking personal and flow through entity tax returns. A CPA would could botch an audit and get into more serious issues, there is no question about needing it.

Michael

While it may be true that most people don't want to hunt down someone for a judgment, I'm not willing to accept the risk that it won't happen. With insurance, someone is there to guide you through the process and take over at a certain point.

Michael... it depends how fast they spend that $3,000! Sure, the truth was that they in fact owed taxes, but they would probably argue that they reasonably relied upon your advice that they were due a refund, and of course, spent it on that basis.

Michael

in the $800 neighborhood for $100K coverage and a 5K deductible and is only for tax work and compilations. 20 years on my own and never been sued, never even a threat BUT I would never practice without it.

What E&O insurance does for you, regardless of policy limits, is provide you with a fee-paid defense. That alone makes it worthwhile. Believe me, you do not want to have to hire a lawyer out of your own pocket or, worse, spend your otherwise billable hours trying to defend yourself pro se. You CAN be sued even where you've done nothing wrong and the Court will not necessarily award you your fees even if you win.

I wonder if this might be akin to the pre-paid legal scams that employers are selling as a benefit?

Michael

No, it will be a decent defense because the insurance company's own $100,000 or whatever is on the line. Insurance companies DO give small cases to new, untried firms because they are always on the lookout for new firms willing and able to do the work. But since they themselves cover the damages less any deductible, they are pretty careful about whom they select and they watch their selected lawyers pretty carefully.

As an aside, that's why YOU don't get to pick your defense lawyer; the insurance company considers that choice to be WAAAAY too important to allow their insured to make.

As a further aside, long ago I received just such a small case from an insurer and quickly figured out that I didn't want to do insurance defense for a living.