Professional Indemnity Insurance (PI) is typically a sophisticated area. Policy wordings can vary quite fundamentally from Insurer to Insurer. Different professions have different needs and as a result specialist wordings exist for a few industries like it, marketing, media, construction, surveying, architects, etc.
Some professional bodies require their members' insurances to be written on an approved wording, Accountants and Solicitors PI being two examples.
Examples of the professional indemnity insurance terms that you simply are likely to encounter when considering this protect your business include:
Claims Made
Professional Indemnity Insurance policies are written on a claims-made basis. this suggests that it's the policy that's in situ on the date a claim is formed against you, instead of at the time you administered the work, which can answer a claim
Retroactive Date
As mentioned above as your professional indemnity policy is written on a claims-made basis, it's your existing insurance firm that's responsible for claims made today for work administered within the past. The retroactive date noted on your policy fixes the return which they're potentially liable. A claim made against you for work administered before the retroactive date won't be covered.
Your PI policy will show a retroactive date of either:
Inception - namely the return which you initially placed your insurance with them
A specific date eg 01/01/2000 - this is often usually the date that you simply took out your first professional indemnity policy
None - this usually 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 how wider civil liability basis, which could cover you in respect of claims arising from
Breach of professional duty;
Dishonesty of employees;
Libel or slander;
Unintentional breach of confidentiality;
Unintentional infringement of property rights. (Some insurers restrict this to unintentional infringement of copyright only)
Loss of or damage to documents.
The Limit of Indemnity
The limit of indemnity is that the utmost that an insurance firm can pay out. A classic example of when professional indemnity insurance terms can make it difficult to match quotations, you'll get to know whether the limit of indemnity applies "in the aggregate" or to "any one claim".
"in the aggregate" this suggests that the limit of indemnity is that the utmost your insurance firm pays during the whole period of insurance, no matter what percentage claims you create . as an example if your limit of indemnity is £1,000,000 within the mixture and thru the number of insurance you're unfortunate enough to possess three claims successfully made against your business each for £500,000, you will find yourself having to fund a £500,000 claim yourself
"anyone claim" the limit of indemnity is that the utmost your insurance firm pays for anybody's claim. within the instance above as each claim could also be a smaller amount than the £1,000,000 limit of indemnity they are going to pay each claim within the entire (less the policy excess see below)
The choice of a limit of indemnity for your business' professional indemnity insurance is muddied further by the matter of defense costs, see below.
Including Defence Costs or Defence Costs additionally
How your insurance firm treats the matter of defense costs should be a crucial factor when assessing your limit of indemnity. Some insurance companies state that their limit of indemnity is £x, defense costs additionally. this suggests that the limit of indemnity applies to the awards element of a claim against you which of them of the legal costs incurred are becoming to be paid by your insurance firm added to the limit. Other insurers will include defense costs within the entire limit of indemnity meaning that a coffee limit of indemnity could get quite quickly devoured by legal costs
The Excess
The treatment of the surplus can vary from policy to policy too. Some Insurers apply it to the entire claim including the defense costs. Others only apply it to awards meaning that you simply do not get to fund the initial defense costs yourself.
Professional Indemnity Insurance is typically an aesthetic quite Business Insurance. I hope this text has helped you to know the variability of the terms and jargon that you simply are likely to encounter and should assist you to interpret the differences in cover when comparing quotations.
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