The banking industry is very complex and filled with exposures that can easily result in a claim being made against any one of the dozens of employees and managers operating a particular institution. A bank could be sued for anything from a breach of duty, giving misleading statements, making an incorrect statement, or other mistakes related to its deposit, brokerage, insurance, real estate, credit card or a number of other services.
For example, a customer might sue a bank claiming that they honored a fraudulent check or fraudulent wire transfer that caused funds from the customer’s account to be erroneously removed. Professional Liability Insurance for Bankers is a type of errors and omissions (E&O) coverage written for banks and financial institutions. The policies cover mistakes associated with their daily dealings that result in economic losses.
What it does and doesn’t cover
Bankers can purchase professional liability insurance policies tailored to the unique risks that they face. An investment banker spends his or her day working with a number of clients in many different ways and can easily miss a step in the process that could result in penalties occurring. Therefore, they would want coverage for underwriting, syndicating, securitizing and market-making activities, while a lender would want coverage for his or her own activities related to granting, committing to, restructuring or terminating loans and lines of credit.
Bankers professional liability insurance does not cover certain behaviors considered to be criminal in nature. A person working for the bank, who knowingly partakes in fraudulent or dishonest behavior, commits deliberate violations of laws or takes part in other criminal acts would not be covered. 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.
The policy will provide coverage to defend against a lawsuit, even when it is without merit, and for the settlement amount if necessary. You will want to determine the limits of your policy for Professional Liability for Bankers, and design the scope of coverage. You may decide on an all risk policy or one that covers specific perils, a choice that is central to the value of the policy you purchase.