Professional indemnity insurance differs from many other types of insurance. It is generally written on a claims-made basis and includes specific requirements for notifying both claims and circumstances. Clients also have a separate duty to make a fair presentation of the risk when arranging or renewing cover.
As a result, the protection available can depend not only on what has happened, but also on when the matter was raised, how it was reported and what information was provided at renewal.
Clients may not always recognise that an early complaint, allegation or request for remedial work could have insurance implications. Clear advice can help them identify potential issues and take action before a coverage problem arises.
Clients should be encouraged to report concerns as soon as they arise, even if they believe they have done nothing wrong.
A complaint about professional advice, an allegation of defective work or a request for remedial action is likely to amount to a notifiable circumstance. The fact that an allegation lacks detail, or that liability is disputed, does not necessarily mean it falls outside the policy.
Raising the matter early allows the facts and policy wording to be considered before a notification deadline passes.
Clients may assume that they only need to act after receiving a formal letter of claim or court proceedings. Depending on the policy wording, the notification requirement is likely to arise much earlier.
A demand, allegation, assertion of a right or request for remedial work is likely enough to constitute a claim. Information suggesting that a claim may follow would at minimum amount to a notifiable circumstance.
Clients should therefore avoid deciding for themselves that a communication is not serious enough to raise.
Clients should understand that notifying a claim or circumstance under the current policy does not remove the need to consider the same information at renewal.
If the matter is material to the insurer’s assessment of the risk, it may also need to be included in the fair presentation.
The reverse is also true. Disclosing a matter on a proposal form does not necessarily notify it under the current policy.
Clients should therefore consider two separate questions:
Material information may be held by different people within the client’s business. Clients should begin gathering that information early enough to identify complaints, potential claims and other matters that may affect the insurer’s assessment of the risk.
The information provided should be clear, accurate and complete. Completing a proposal form alone may not be enough if other material circumstances are known within the business.
Clients should retain relevant complaints, demands and correspondence, together with records of:
Clear records can help establish the relevant sequence of events and demonstrate what information was provided.
Clients should be encouraged to treat PI insurance as an ongoing responsibility, rather than something considered only at renewal or after a formal claim has been made.
Potential problems should be raised early, even where liability is disputed or the facts are incomplete. Clients should also understand that notifying a matter under the current policy and disclosing material information at renewal are separate requirements.
Allowing sufficient time to gather information and keeping clear records of complaints, notifications and disclosures can help ensure that important matters are dealt with through the correct process.
These practical steps reduce the risk of missed notification deadlines, incomplete presentations and avoidable coverage disputes when the client needs its PI protection.
In relation to NBS PI policies notification of claims and circumstances should be given to and deemed to be properly made, if received by: Caytons Claims claims@caytonslaw.com 10A, Tower 42, 25 Old Broad Street, London EC2N 1HQ
See more of our Professional Indemnity Insurance: A Practical Guide for Brokers