Professional indemnity (PI) will be a complicated space. Policy wordings can vary quite basically from Insurer to Insurer. Different professions have totally different wants and as a result specialist wording exists for some industries such as IT, marketing, media, construction, surveying, architects, etc.
Some professional bodies need their members' insurances to be written on an approved wording, Accountants and Solicitors PI being two examples.
Examples of the professional indemnity terms that you're possible to encounter when considering this cover for your business include:
professional indemnity policies are written on a claims-made basis. This suggests that it's the insurance policy that's in place on the date a claim is created against you, instead of at the time you allotted the work, which my reply to a claim
As mentioned on top of as your professional indemnity insurance policy is written on a claims-made basis, it is your existing insurance company who is liable for claims made these days for work disbursed in the past. The retroactive date noted on your policy fixes the date from that they're doubtless liable. A claim created against you for work administrated before the retroactive date will not be covered.
Your PI policy will show a retroactive date of either:
- Inception - specifically the date from that you first placed your insurance with them
- A specific date, e.g., 01/01/2000 - this can be typically the date that you took out your 1st professional indemnity insurance policy
- None - this typically applies if your business has been insured uninterrupted for several years.
Negligence Or Civil Liability?
Some policies will only indemnify you in respect of a claim brought against you for a negligent act. Others are written on a lot of wider civil liability basis, that would cover you in respect of claims arising from:
- Breach of professional duty;
- Dishonesty of workers;
- Libel or slander;
- Unintentional breach of confidentiality;
Unintentional infringement of intellectual property rights. (Some insurers prohibit this from unintentional infringement of copyright only)
Loss of or injury to documents.
The Limit of Indemnity
The limit of indemnity is the maximum that an insurance company can pay out. A classic example of when professional indemnity insurance terms can build it troublesome to compare quotations, you may want to understand whether the limit of indemnity applies "in the combination" or to "anyone claim."
"in the mixture" this means that the limit of indemnity is the utmost your insurance company can pay during the entire amount of insurance, irrespective of how several claims you create. For example, if your limit of indemnity is £1,000,000 in the combination and throughout the amount of insurance you are unfortunate enough to possess three claims successfully created against your business every for £500,000, you will realize yourself having to fund a £five hundred,00zero claim yourself
"anybody claim" the limit of indemnity is the utmost your insurance company will get hold of anyone claim. In the example on top of as every claim is less than the £1,00zero,00zero limit of indemnity they will pay each claim in the full (less the policy excess see below)
The alternative of the limit of indemnity for your business' professional indemnity insurance is muddied more by the issue of defense costs, see below.
Together With Defense Prices Or Defense Costs Also
How your insurance company treats the problem of defense prices ought to be a necessary factor when assessing your limit of indemnity. Some insurance companies state that their limit of indemnity is £x, defense prices additionally. This implies that the limit of indemnity applies to the awards part of a claim against you and that legal prices incurred can be paid by your insurance company adds to the limit. Other insurers will embody defense costs inside the full limit of indemnity meaning that a low limit of indemnity may get quite quickly eaten up by legal prices
The treatment of the excess can vary from policy to policy too. Some Insurers apply it to the whole claim together with the defense costs. Others solely apply it to awards that means that you are doing not would like to fund the initial defense prices yourself.
Professional indemnity insurance can be a complicated form of business insurance. I hope this text has helped you to perceive a number of the terms and jargon that you're doubtless to encounter and will help you to interpret the variations in cowl when comparing quotations.