Insurance Cover Questions Asked

1. Why do I need a professional indemnity policy?

Professional Indemnity policies provide cover to professionals that offer advice or professional services to the public.  Clients that seek advice from professionals expect the advice they are given to be accurate and appropriate for their needs.  If it is not, the client may hold the professional firm liable for any loses it has suffered as a result of the incorrect advice.  The PI Policy indemnifies practitioners against errors or omissions which they cause negligently while effecting their duties as a professional.

2. How long should I have insurance for?

You should take out a PI policy out the day you start operating a practice which performs professional services or gives professional advice to  the public.

3.What If I don’t have the money right now, can I take out a PI policy out later when I do have the money to pay for it?

Yes you may approach an Insurer when you have the money however you must realise that you won’t enjoy  cover through your PI Insurer until the policy start date (inception date) unless you ask for a retroactive date to cover historical work  performed by you and other employees of the firm.

4. What is a retroactive date?

It is not the inception date but it is a date in the past signifying the period from when your insurer will cover any historical work which results in a claim being a made against you after inception of the policy.

Explained by way of example:

1. Joe takes out a PI policy on 1/8/2019.
2. Joe did work without insurance from 1/5/2015 to 30/7/2019
3. Joe seeks retroactive cover from his Insurer for the uninsured period
4. Insurer grants Joe retroactive cover from 1/5/2015 to 30/7/2019
5. Joe has a claim made against him on 5/8/2019. The claim relates to work which Joe performed before the policy started but after 1/5/2015.
6. Will Joe have cover for this claim? Yes Joe will have cover as the claim was made after the policy incepted, and cover was selected  for historical work which gave rise to the claim being made now.

5. Will my Insurer give me a retroactive date?

Insurers do sometimes offer this on first time policies. Every Insurer is different. Their decision to provide this cover for historical events depends on what the likelihood of claims arising from the past work is and the nature of the work performed ie Litigious or not.

6. Is purchasing a retroactive date expensive?

Purchasing retroactive cover can be expensive (in the form of an increased premium) as the Insurer is basically being asked to provide cover for historical work which it has no guarantees was performed correctly or without errors or omissions.  It is a bit like playing the lottery for the Insurer.

To decide whether or not to give such cover for historical work, your Insurer will ask you some questions about your risk management and the nature of the work performed as well as any intimations of claims.  In addition you can expect to be asked to sign a “no claims declaration” declaring that no claims or intimations are known to you at the time of the Insurer quoting on the cover.

7. What if I have a claim relating to work prior to the retroactive date.

Any claims that arise from events prior to this date will not be covered by your insurance.  This is a risk you take in not taking insurance from inception of your business or not being granted retroactive cover for historical worked performed. Your best case scenario then would be that the work which you performed historically was not for high value transactions, was non contentious in nature, and sufficient time has lapsed such that any claims may have prescribed in law.