Recommended By:-Recommended By:-

Professional Indemnity Insurance

Darren PavicBovill Risk & Insurance ConsultantsApril 2012

Overview

PI Policy basics Buyer beware!.....things to watch out for Getting the most out of your professional

indemnity insurance renewal The Brokers role FAQs

Policy Basics - Why buy PI and what does it cover?

Protection of your assets; Satisfy your statutory or contractual obligations; Consumer protection;

Professional Indemnity insurance provides you with funds to pay compensation to a third party arising from a claim made against you for a beach of professional duty;

It also importantly funds legal costs to defend such claims

“Professional” activities include design, advice or specification

Key Attributes

Notification of claims must be made whilst the policy is current:-- “Claims Made” insurance- All Claims or circumstances must be reported

This insurance is “retrospective” therefore you must continue to maintain a policy

s40(3) of the Insurance Contract Act

A “circumstance” is generally defined by insurers as anything the insured knows may lead to a claim or an allegation of liability against them

PI Claims

What is a claim – policy definitionTypes of claims: personal injury, property damage or financial loss

PI vs. PL

Most claims involve defence costs onlyInsurers claims costs are approx. 50% legal expenses

Claims examples

Be wary of the detail: example

EXCLUSION - CLAIMS ARISING FROM BUILDING REPORTS OR PEST INFESTATION

We do not cover any claims arising directly or indirectly from or arising out of, or in respect of any of the following:-

a) pre-purchase building inspections and/or reports, or b) the provision of pest inspection reports (pre-purchase or otherwise) c) damage or loss due to pest infestation

For the purpose of this endorsement the reference to pre-purchase inspections and / or reports shall include where those inspections and reports have been conducted in respect of a conditional purchase.

Be wary of the detail: example

Cost advice We will not cover claims arising from:

any quote, estimate or assessment of construction costs unless such estimates have been substantiated in writing by a qualified quantity surveyor

Bodily Injury/Property Damage (exclusion or sublimit)

LegionellaMould/fungus – wood rot

The Broker’s role

Market participants - Insurers- Lloyd’s- Underwriting agencies

Who’s agent is the broker?A broker acting under Binding Authority acts for the insurer

Some brokers own and recommend their own underwriting agency

Define your business in lay terms

Do not present a “wish list” of activities

Do not submit “sales brochures”

Disclosure is critical but presentation is also very important

Getting a better PI deal

How does risk management fit in?

Part of the qualitative aspects of a risk

Sometimes it does not matter

Sometimes it is critical: High risk activities, adverse claims experience

Getting a better PI Deal

FAQ – Contractual Liability

Assumed Liability - Liability assumed under contract that would not have existed in the absence of that contract

Typical policy exclusion:There is no indemnity for any liability assumed by

an Insured by way of contract, warranty, guarantee or indemnity, unless such liability would have attached to the Insured in the absence of the contract, warranty, guarantee or indemnity

* Also be wary of insurance requirements

FAQ – What happens when I retire

“Claims made” nature of PI

Continue to purchase (run off cover)

Succession plan/Sale

Any plan is better than none

FAQ – Cover for employees

Definition of Insured

What about past employment?- Of directors?- Of employees?

Personal Liability

FAQ - What limit do I buy?

Key Factors:

- Statutory requirements - Nature of services - Types of projects - Client/Contractual requirements- Perceived exposure: Financial Loss, Property Damage,

Personal Injury - Cost- Your risk appetite

Any questions?