Professional Indemnity Insurance
As specialist professional indemnity insurance brokers we are ideally placed to assist with a wide range of occupations and professions.
We have been actively engaged in the professional indemnity insurance market for over 30 years and our team enjoys a wealth of experience in both broking and underwriting.
What is professional indemnity insurance?
Th professional indemnity insurance policy protects the policyholder in respect of their legal liability for loss arising from a breach or an alleged breach of professional duty.
Who needs professional indemnity insurance?
All professions and occupations trading on the delivery of advice and consultancy services should consider professional indemnity insurance. For many it is a regulatory requirement of their profession and a fact of life for many of the more traditional professions but for many others it is not, yet the costs of both defending any legal action against them and any resultant awards if you are found to have been in breach of a professional duty can be catastrophic for your business. The legal costs alone may be enough to ruin a small consultancy firm.
These days it s commonplace for businesses to outsource professional and consultancy services and whilst this can provide lucrative employment for many small consultancy firms, that work does not come without risk. The consultant has to recognise that they are being paid for the exercise of their professional skill and that their employer will hold them responsible for losses if they are found to be in breach of a professional duty.
What is the limit of indemnity under a professional indemnity insurance policy?
The limit of indemnity is the maximum amount of the insurance company’s liability in respect of any one claim under the policy.
Traditionally professional indemnity policies were issued on an any “aggregate” basis, which means that the limit of indemnity is tha maximum payable in respect of any one claim and in any one period of insurance.
It is becoming increasingly common for professional indemnity policies to be issued on an “each and every” basis which means that the limit of indemnity applies to each any every claim under the policy.
When comparing the two the “each and every” basis is clearly more desirable but it is not always available and in some cases the different cost of the options may influence your decision.
The limit you choose under your policy is a matter for your own consideration of the risks that face your business and in many cases the details of any contract terms you enter into or regulatory requirements that are placed upon you.
What is the the claims made basis of settlement under a professional indemnity insurance policy?
If you are not familiar with the expression claims made then this is a very important aspect of professional indemnity insurance policies and can have serious ramifications for policyholders.
Most general insurance policies respond on a claims occurring basis. This means that the policy responds to claims that occur whilst the the policy is in force. In simple terms, if you have an accident in your car then you claim under the policy that was in force on the day of the claim.
Policies that are written on a claims made basis, which professional indemnity insurance policies do, respond to claims made against the policyholder during the current policy year only. This is a very significant factor for policyholders and creates two particular problems. The need for retroactive cover and the need for run-off professional indemnity insurance.
What is the retroactive date on a professional indemnity insurance policy?
As the professional indemnity insurance policy only responds to claims made during the policy term and because of the nature or the work that is undertaken by policyholders it is highly likely that a claim may occur in respect of work undertaken by the policyholder prior to the start of the current policy.
The retroactive date under the policy specifies the date from which work undertaken by the policyholder can result in a claim under the policy. Some polices have no retroactive date, this is only suitable for a new start business as the policy will not respnd to claim arising from work undertaken before the start of the current policy.
More commonly, policies will contain an actual date. This date should be the date the policyholder commenced trading or the start date of their first professional indemnity insurance policy.
The optimum situation is a “zero” retroactive date which means, somewhat counter intuitively, that all work prior to the start date of the current policy is covered. This is the ideal but is not always available from underwriters.
What is run off professional indemnity insurance?
As the cover under a policy ceases on the day the policy expires this raises the question of what happens to claims made against the policyholder at some point in the future perhaps after they have ceased trading whether this be through the sale of the business, retirement or any other factors.
At the end of the current policy term a policyholder can buy a run off professional indemnity insurance policy that will be available at a fraction of the cost of the expiring policy. The run off cover may be purchased for a year or for a number of years with the premium for each year reducing along with the likelihood of a claims being made against the policyholder.