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Fee Disputes Exclusion

Fee Disputes Exclusion

Definition

Fee Disputes Exclusion — an exclusion found within a significant minority of professional liability insurance policies that precludes coverage for claims made against professionals arising from a disagreement about the fees charged by such professionals. The typical sequence of events that produce these types of claims is (1) a client disputes the amount charged by a professional after receiving his or her bill, agreeing to pay only a part of the bill (or perhaps none of it); (2) the professional brings a collection action against the client for the unpaid balance of the bill; and (3) the client responds to the collection action by filing a claim against the professional, alleging that the professional negligently performed the services that are the subject of the dispute. The rationale for excluding claims involving a fee dispute is that insurers consider such matters to be business risks, rather than risks originating from the negligent performance of professional services. Another reason for the exclusion is that insurers view these disputes as largely preventable, provided the professional clearly explains his or her fee structure and obtains the client's agreement to those fees, in advance of actually performing professional services.

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