In general, most claims against banks arise from dissatisfied customers or regulators. Banks face many types of claims, from wrongful foreclosures to unfair loan terms, even claims of discrimination. Once any type of fraudulent activity is alleged or discovered, the affected customer may decide to sue the bank for negligence in hopes of receiving a favorable judgment and being compensated for any loss they may have experienced.
Financial institution errors and omissions (E&O) coverage, also referred to as Professional Liability Insurance for Bankers, has become a relatively standard policy among financial institutions. Legal claims asserting professional negligence can be quite costly without a policy in place and legal actions against financial managers are a real concern.
Losses resulting from wrongful professional services
Wrongful Professional Services Acts means any actual or alleged omission, error, misstatement, misleading statement, neglect or breach of duty by an insured in rendering or failure to render professional services. Doctors and lawyers have long purchased insurance that addresses concerns related to the type of work they practice. The word “professional” extends itself to many different sectors.
If you provide services and can be held liable for mistakes in the commission of the work or services you perform then you need coverage that addresses these exposures. For example, let’s say that a small business owner purchases a policy from a bank’s insurance agency, but neglects to purchase business interruption coverage. In the event that his or her operation catches fire and burns to the ground, they may sue the agency alleging that the agent that sold them coverage never explained, or neglected to mention, the need for such coverage.
In addition, bankers should refrain from disclosing to anyone the details about a customer’s account, including such disclosures that may adversely affect the credit and business of said customer. However, a disclosure can be made when the law requires such disclosures be made, or when the practices amongst banks permit such disclosure.
Protecting the rights of customers should be first and foremost for any business and especially for banks. If that trust is breached then you can expect at least the possibility of legal actions and should have Professional Liability Insurance for Bankers to address these situations when they occur.