Professional Indemnity - Glossary of terms
It can be difficult to understand the insurance ‘jargon’ in your policy. When it comes to reviewing your cover, you might have forgotten what a term means for your business. So, we have created a glossary of some common terms to help you understand your professional indemnity policy better.
Breach of Duty of Care
This is where a company, professional, group or individual does not meet their duty of care.
Breach of Confidence
This occurs when information is given out or revealed from one party to another without consent or permission.
Limit of Indemnity
This is the highest compensation that will be paid out under the policy in the event of a claim. Any costs and expenses incurred in the action can be included within the limit of indemnity or in addition to it – this will depend on the policy purchased.
In the aggregate (or all in)
This means that the limit of indemnity stated is the total sum of money that will be paid out under the policy in the given period. If the limit is £300,000 and a first claim results in a payment of £200,000, then the cover for the remaining term of the policy will stand at £100,000.
Any one claim (or each and every claim)
This means that the number of claims which can be notified within the policy period is unlimited and the full limit of indemnity is applicable to each and every claim.
Excess (or deductible)
This is the agreed amount that you are responsible for under any claim.
This means any behaviour or conduct by professionals/you that doesn’t adhere to the required standards set by law and results in a loss. It specifically relates to a situation where someone professes to a particular skill or ability, such as a doctor, solicitor, dentist, architect or accountant.
Notifiable circumstances or claims
As the policyholder, it is essential that any claim, or incident that may lead to a claim, is notified to your insurer as soon as possible. Not all complaints or issues will lead to a claim, but it is strongly advised to let your insurer know so that any actions can be taken if deemed necessary. Your insurer may be able to help you to reach an amicable solution.
This means a failure to act, where you are bound to do so, either deliberately or accidentally. For example, you fail to include information within a document, or forget to give instructions to a third party on behalf of your client.
The date your policy starts and from when you will be covered.
This is where the PI policy is cancelled before it officially expires. Specific clauses and refunds may be included, but these will be subject to the specific terms and conditions of each policy.
This is where the insured has failed to disclose a material fact to the underwriter before the risk has been accepted.
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.
Reservation of Rights
A reservation of rights letter is provided by an insurance company to an insured party indicating that a claim may not be covered under a policy. The letter indicates that the insurer is investigating the claim and reserves the right to deny the claim after it completes its investigation.
This refers to an outstanding issue that needs to be resolved before the insurer will agree terms and conditions. Typically, this will be a request for more information or a specific question about the risk.
In professional indemnity policies this is where the insurer has the legal right to recover its loss from a third party. An example would be when a sub contractor causes a loss when working for a larger client. Your insurance company would pay the claim and then seek recovery of their payment from the third party who caused the loss.
Territorial and Jurisdiction Limits
These terms specify regions of the world where the insurer will provide cover, for example UK, EU, USA & Canada or ROW.
Utmost Good Faith
This means that both parties cited in the policy have a duty to act honestly and not mislead one another or withhold critical information. If the client breaches this duty, the insurer has the right to repudiate liability and reject a claim.
We also have answers to your frequently asked questions. to help you understand what should be included in your cover. You can read our Professional Indemnity FAQs here.
If you have any questions or would like to talk to us about your professional indemnity requirements – call us on 01480 272727 or email us at firstname.lastname@example.org