Professional Indemnity Insurance

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Professional Indemnity Insurance

• Darren Pavic
• Bovill Risk Insurance Consultants
• April 2012

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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

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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

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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

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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

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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-
• pre-purchase building inspections and/or
  reports, or
  
• the provision of pest inspection reports
  (pre-purchase or otherwise)
  
• 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.

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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

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The Brokers role

• Market participants
• Insurers
• Lloyds
• Underwriting agencies
• Whos agent is the broker?
• A broker acting under Binding Authority acts for
  the insurer
• Some brokers own and recommend their own
  underwriting agency

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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

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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

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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

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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

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FAQ Cover for employees

• Definition of Insured
• What about past employment?
• Of directors?
• Of employees?
• Personal Liability

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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

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• Any questions?