Professional Indemnity Insurance - Frequently Asked Questions
Professional Indemnity is a complex insurance cover with many extensions available. Our Professional Indemnity FAQs provide you with answers to help you understand this insurance cover and your policy better.
What is a Claims Made policy?
This term relates to Professional Indemnity insurance and means that you can make a valid claim against your policy during the period of insurance. Typically this will be a 12 month period.
If the wrongful act occurs during the period of insurance and you report it to the insurer during the duration of the policy, you will be covered.
If you cancel, or do not renew your policy, the cover will end and any subsequent claim, regardless of when the wrongful act occurred, will not be covered under that policy.
What is a Claims Occurrence policy?
This type of policy is written to cover your business against an event. You can take action at any time after the event has happened, making them a popular option for some professionals including private practicing doctors, dentists, architects and solicitors.
What is the difference between a Civil Liability policy and a Negligence policy?
A negligence-based policy provides cover for a breach of duty of care resulting from a negligent act, error or omission. It will not cover for claims that are based on a breach of contract or statute law.
A Civil Liability policy is wider in scope. It does not set boundaries (other than exclusions) as to the nature of the wrongdoing. It can encompass negligent acts, errors or omissions and also include breach of duty of trust, conflicts of interest, breach of statute law and defamation.
Civil Liability policies do contain a greater number of exclusions than negligence-based ones, so it’s important to get advice on which policy fits your requirements.
As specialists in PI insurance, we can ensure that you have the right policy for your needs.
What is Costs Inclusive excess?
This is the excess applied to the aggregate of damages, defence costs and penalties (if insured). It is payable by you whenever your insurer investigates or defends a claim against you, regardless of the outcome.
What is Costs in Addition excess?
This means the policy excess would only apply if you were found to be at fault and the insurer has to compensate your client.
What is Costs Exclusive excess?
This means the cost of defence is paid in full by Insurers regardless of any excess.
What is Run Off Coverage?
This coverage can apply to individuals or business entities.
If a company ceases to trade, sells its assets or merges with another organisation, Run Off cover applies. The policy will provide coverage specifically for any acts occurring prior to the date on which the company ceased trading, sold its assets or merged.
For individuals (directors of companies or partners of professional firms) it provides cover if they have relinquished their position or following retirement. Without Run Off cover they would have to cover the costs to defend a claim from their own private funds.
What does Vicarious Liability mean?
This means that one party is held responsible for the unlawful actions of a third party. Sometimes known as employers’ secondary liability, an employer may be held responsible for the actions of an employee. An example of this would be an employee of a company providing negligent advice on its behalf.
What is Retroactive/Retrospective cover?
Retroactive cover provides insurance protection against work carried out in the past by the client. It may be needed if the client hasn’t held PI insurance previously, and the insurer isn’t willing to cover any claims that arise from work carried out prior to the issue of the policy.
What is Loss of Documents cover?
This cover pays for costs arising from the loss of documents including paper and computer records, maps, certificates etc.
What is Libel and Slander cover?
If you offer advice as part of your service, then this is a vital cover for you. This extension covers written (libel) and spoken (slander) statements of a defamatory nature, which misrepresent and harm the reputation of another.
What is a Collateral Warranty?
This is an additional contract, usually connecting a contractor or subcontractor with another interested third party. The contract gives the third party the right to sue the warrantor.
What is a Material Fact?
This is any fact or information that would influence the underwriter in accepting or declining a risk or would have bearing on the premium or terms and conditions of the policy.
Material facts or material information must be fully disclosed to the insurer.
We have also created a glossary of common terms used within professional indemnity insurance documents which you can find here.
For more information or to discuss your professional indemnity policy, please call us on 01480 272727.