Understand five professional indemnity insurance issues: insured services, omissions, claims-made cover, run-off arrangements and retroactive dates.
Professional indemnity insurance, often called PI, concerns claims arising from professional services, advice, errors or omissions within the policy’s scope. It is not a guarantee that every dissatisfied client, missed deadline or breach of contract will be covered.
The right questions go beyond the premium and headline limit. These five points help explain why the description of your work and the timing of a claim matter.
1. It is not only for traditional professions
Doctors, lawyers and accountants are familiar examples, but consultants, designers, engineers, project managers and other businesses may also provide advice or professional services. The activity matters more than the job title.
Explain what clients pay you to do, the decisions they rely on and any work subcontracted to others. A trade business that also designs or specifies work may need a different discussion from one that only follows another party’s design. Public liability and professional indemnity are not interchangeable.
2. An omission can matter as much as incorrect advice
A complaint may concern something a professional failed to do, as well as something done incorrectly. Missing an agreed check, failing to pass on important information or overlooking a required follow-up can lead to an allegation of loss.
Clear engagement terms, documented assumptions and records of client instructions help define the service. Keep track of changes to the brief. Whether a particular allegation is insured still depends on the facts, the policy and any applicable exclusions.
3. Claims-made cover requires attention to timing
PI is commonly written on a claims-made basis, often with notification requirements. The relevant policy is not necessarily the one that existed when the work was performed. Read the terms about when a claim must be made and notified, and how circumstances that may lead to a claim are handled.
Raise complaints or potential claims promptly with your broker or insurer. Do not wait for court papers or assume a new policy will pick up a problem already known to you. Disclose known matters accurately when applying for or renewing cover.
4. Stopping work does not necessarily end the exposure
Advice or work completed years earlier may still lead to a claim after retirement, a business sale or closure. Before cancelling or allowing a policy to lapse, discuss how that continuing exposure will be addressed.
Run-off arrangements may be relevant, but their availability, duration and terms vary. Professional or regulatory requirements also differ. There is no single period that can safely be assumed suitable for every business.
5. The retroactive date needs checking
A retroactive date can limit how far back the insured professional work may extend. It should be reviewed when first arranging insurance, changing insurer or altering the business structure. A policy starting today does not automatically protect all earlier work.
Check prior activities, continuity, known-circumstance exclusions and any conditions affecting retroactive cover. Bring existing and proposed policy documents to the discussion so that dates, insured entities, defence costs and limits can be compared together.
Adapted from material previously supplied for Aushine client communications. This website edition has been edited; the Chinese edition is a translation of the edited text. General information only: it does not confirm cover or take account of your objectives, financial situation or needs. Consider the applicable policy documents and obtain advice appropriate to your circumstances.
