Be Aware that Professional Indemnity Insurance is a Claims Made Policy

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.    

   

      

Professional Indemnity – Claims Made Policies from OptimumInsurance