When reviewing Professional Indemnity (PI) insurance most of the focus is usually geared towards the level of cover but the type of cover held should not be ignored. To briefly summarise (assuming period of insurance is one year):
- Each and every claim – represents the maximum amount for every single claim brought in each year.
- In the aggregate – represents the total amount for all claims brought in each year.
- Reinstatement – based on option 2 above but the original policy is reinstated (once or several times). However, it is very important to understand when and how a reinstatement is triggered. For example, the reinstatement cover may only apply to new unrelated claims when the initial cover has been depleted. Therefore, whilst ‘unlimited reinstatements’ cover may seem the same as ‘each and every claim’ cover, there will be differences.
- Exemptions – different levels of PI cover may be given for claims relating to asbestos, pollution and/or contamination typically encountered with civil, structural and ground investigation engineers. It is well worth checking that the items listed in the exemptions are not actually items which your business needs cover for.
Further things to note:
- PI insurance is usually written on a ‘claims made’ basis rather than an ‘occurrence’ basis, but check your policy. If the former, the cover is triggered when the claim is made against the insured and not when the event resulting in the insured’s liability occurs. There is generally a requirement in the policy to report any circumstance which may give rise to a claim.
- A cap on liability may be introduced into a contract which is the same level as the PI cover. We will be covering such caps on liability in another blog post soon.
So before you are quick to agree the level of PI insurance cover, do take the time to review the type of cover being provided and any relevant terms and conditions of the policy…it may end up saving you a lot of money.
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