Risk Management - Engineers Australia

Report
Professional
Indemnity
Insurance
Darren Pavic
Bovill Risk & Insurance Consultants
April 2012
Recommended By:-
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 definition
Types of claims: personal injury, property
damage or financial loss
PI vs. PL
Most claims involve defence costs only
Insurers 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)
Legionella
Mould/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
Getting a better PI deal
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
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?

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