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IN STEP with Sue Hillegass

Q & A: Before You Do Anything New with Your Accounting Practice, Talk to Me


How can you establish a business relationship with your client so that they call you when considering a new or different area of practice?

Two words: Communication and Education. Just as important as understanding what is covered under the client's professional liability policy is knowing what isn't covered. It's up to us to listen and ask the right questions.

An application is designed to capture an overview of the firm's practice. However, it can leave out the firm's unique attributes, and often we may need to delve into the practice a little bit more. There are times when the firm provides services that may be covered under their current policy, but another type of professional liability policy would offer expanded coverage and provide a better insurance fit to the exposure.

For example, for our firms who provide personal financial planning services, an investment advisor's policy might address the risk exposures in a preferred way, rather than the Accountant's professional liability policy. A variety of specialty policies are available, Directors & Officers (D&O) coverage, Cyber Liability, Employee Dishonesty. Again, it goes back to communicating, listening and educating the client. Obtaining stand-aloneWe will fight the fight for our clients coverage for Directors & Officers, Employee Dishonesty, Cyber Coverage, and Employment Practices Liability not only provides more definitive coverage, but can distinguish the exposure from the professional liability policy.

We also have an engagement letter review service that has been very well received and is very popular with our clients. John Raspante is a CPA, and our Risk Management Director. He can look over engagement letters and offer suggestions and recommendations to make sure that all the appropriate verbiage is there. This is particularly important when a client is taking on new risk. Having John review the engagement letters, so that we can make any changes or suggestions for changes, ensures that the firm and their client have a mutual understanding of what services are being provided..

Q: How can you ensure that the policy includes everyone: subsidiaries, additional insureds, sub-entities, DBA's?

Again, it goes back to asking pointed questions at the time the policy is secured or renewed. Sometimes CPA firms unintentionally omit other services that they provide, perhaps under another name, making the assumption that everything they do is covered. So, we look for scenarios like that and try to determine if they are practicing under or providing different services under other entities.

We try to review the client's website and look for additional details we might not have known about from the application. The application does not always capture some of the information that can be found on the firm's website. It becomes a process of reading between the lines.

Q: How do you (and McGowanPRO) accomplish this?

If we identify other services that the firm offers that would alert us to recommend a stand-alone policy, we will have that discussion with the client. For example, if the client is doing payroll services or billing out some of their services under a different name -- sometimes for tax reasons it is beneficial to do this -- we would strive to make sure we are providing the right coverage, the coverage that the firm needs. We make sure that our clients are aware of all our available resources. We can't always catch everything. No one knows their business better than the firm, which is why communication is so important.

We want to make sure they know we provide education, that there is open communication, and they can call us for anything. And they do -- it is very flattering. Even if they have a question on one of their other policies that we don't write, we're certainly going to help them in any way we can.

Q: Do you have any firsthand experience with firms not having all parties covered? Or are you aware of situations where this has been an issue?

We often see it with trusts. For example, the partner in one of our firms, who is a trustee for a client of the firm, bills out under his own name for the services he provides to the trust. In a situation like this, we want to capture that information and notify the carrier that this trustee is providing the services under his own name so that we can add him as an additional insured. Again, there are stand-alone trustee policies, but that's not always necessary. It is another expense, so if we can get the carrier to add them as an additional insured, then we certainly go that route. Our goal is to do what is in the best interest of our clients.

Q: Do you have a War Story insurance claim you can share?

A McGowanPRO insured provided accounting-related services (non-attest) to a business entity where it also had a small ownership interest. During a fall-out with several of the other owners, a lawsuit arose which alleged -- among other things -- malpractice against the CPA. The claim was submitted to the insurance company, and it was determined that the nature of the claim had to with board decisions unrelated to the professional activities of the CPA.

The insurance company agreed to provide defense to the CPA, but it cautioned the insured that claims unrelated to professional services are not a covered cause of loss. The application did not address this exposure. If it had, we would have recommended that the entity purchase a Directors & Officers insurance policy and explained the nuances of this coverage.

Q: What sort of firms have these issues? Or why do situations like this arise?

Accountants, like most businesses, only deal with their professional liability insurance once a year. Firms don't necessarily know that they need to add an additional insured or potentially look into a stand-alone policy, so, we ask for as much information as possible. We try to have our clients understand that risk management is a continuous process.

In the case where a firm is new to McGowanPRO, we'll always ask for their full current policy. We want to see who already is covered under their policy, make certain that all of the information is correct and that nothing has changed.

Q: Any other words of wisdom you can share with our clients/prospects?

I cannot stress engagement letters enough. Also, the fact that we have internal risk management resources and that our clients have access to individuals like John Raspante and our attorney, Ralph Picardi, is hugely beneficial. We hope that people will take advantage of this expertise, protecting themselves from the very beginning before the engagement is accepted.

Q: What do you like most about your role here at McGowanPRO?

We get to work with really interesting people. Our clients have been wonderful over the many years that I have been doing this. I enjoy getting to know them and seeing their businesses flourish and grow. I feel I can provide them that comfort level -- that that they are properly insured, that they don't need to worry about this part of their business.

I love it when I get a call from a client saying, "I just want to run something by you." I feel I have really developed a good business friendship with these people rather than strictly a professional relationship where I am just the agent who handles their renewal.

I also enjoy working with the underwriters. It's a lot of negotiating, and I really enjoy that. We don't always agree with limitations imposed by the carrier, and we will fight the fight when we need to advocate for our clients. We're fortunate that we work with carriers who are open to dialogue and are willing to work with us. We work hard at building and maintaining those relationships. Our clients know that our professional liability insurance knowledge, combined with years of experience (many, many years in my case) benefits them immeasurably.

Q: Mergers and Acquisitions are happening with greater frequency. What are some important steps that should be taken prior to this type of change?

It is imperative that the client has a discussion with McGowanPRO prior to a merger or acquisition. We need to ensure that the firm merging in is properly covered, and that they purchased the right extended reporting period ("tail"). Several options are available, one year, two, five, and some carriers offer an unlimited tail. A tail is never inexpensive, however it is an absolute necessity. The tail is essential to keep past exposure separate, prior to joining a new firm. If a firm merging into another secures a one year tail to cover past exposure, at the end of that year, there is no longer any coverage. We recommend purchasing the longest tail available, understanding cost is a consideration. (See upcoming John Raspante interview)

It is really important to have those conversations in advance. We constantly remind clients to call us about any significant changes in areas of practice or structural changes in the firm. While some matters can wait until renewal time, there are matters that need to be addressed mid-term.

Q: What sorts of trends or industry changes are you seeing?

One of the things that is surprising to me is the sluggish response to securing cyber coverage. We are deluged with news coverage of data breaches and catastrophic cyber attacks, yet information security/data privacy liability insurance is often seen as just another policy, another expense for the firm. Insurance carriers across the board have seen a tremendous rise in these claims. When you are the victim of a cyber attack, steps must be taken immediately. These steps are costly as the firm may potentially have to notify all of their clients, offer long term credit monitoring, among other measures. This is an unexpected, costly occurrence and every firm needs to be prepared. This is a huge risk, and it is our job to educate firms on protecting the client's personal information as well as their own.


This is the first in a series of McGowanPRO employee interviews focusing on different aspects and issues concerning McGowanPRO's professional liability insurance programs and services.

For more Accounting resources or to request a review of your current Errors & Omissions policy, visit: