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?