Claims Made policies provide cover for claims made or known; a fact, situation or circumstance (“known circumstances”) what a reasonable person would think could reasonably be expected to give rise to a claim against you during the period of insurance. Acts or omissions may have occurred in a prior period and, as long as the act or omission was after the retroactive date, the policy will extend to those prior acts (subject to the general terms and conditions of cover). It is therefore important to maintain continuity of Professional Indemnity Insurance cover.
If there is any claim, potential claim, or even a circumstance that could be expected to give rise to a claim, it should be reported to your insurer immediately, regardless of who is at fault. Otherwise, if the matter is reported to your insurer after the expiry date of your insurance policy, it is unlikely to respond unless cover has been maintained with the same insurer, the non-disclosure was not fraudulent and you have not prejudiced the terms and conditions of your policy.
Why do Claims Made Policies Exist?
Claims Made policies help reduce uncertainties relating to the “Operative Clause” trigger in long-tail business risks. These uncertainties can be:
- Any damage that is not realised until many years after work has been completed;
- A difficulty to pin-point when the act, error or omission occurred; or
- A loss covered by an “Occurrence-based” policy having an inadequate sum insured.
With Claims Made policies, it is important that:
- Cover is maintained for as long as there is a risk of claims being made.
- Run off Cover is considered after the business ceases to operate or is sold.
Disclaimer – “This material contains general information only and may not suit your particular circumstances. To decide if a policy is right for you please carefully read the relevant Product Disclosure Statement (PDS) and/or Policy wording. While we have exercised due care and skill in preparing this information, Optimum Insurance Services (Optimum) does not accept any legal responsibility or liability for negligence or otherwise to you or anyone else who seeks to rely on this information. This includes, without limitation, loss arising from a possible failure of the information to comply with statutory or regulatory requirements or the failure of the information to identify other terms and conditions beyond those considered in this document. You should obtain advice to ensure that your policy provides adequate cover for your circumstances.
Optimum Insurance Services Pty Ltd is a Corporate Authorised Representative of Insurance Advisernet Australia Pty Ltd (Car No. 291220), Australian Financial Services Licence No 240549, ABN 15 003 886 687.”