Professional Indemnity
What is Professional Indemnity insurance? Insurance cover that protects a Professional (company, organisation or entity providing a professional service) Against the Insured s legal liability to a THIRD party to: Pay compensation as a result of any actual or alleged negligent act, error or omission in the performance of the professional duties undertaken during the course of their business
Three requirements 1 LIABILITY 2 NEGLIGENCE 3 IN THE COURSE OF PROFESSION
Who is exposed? Companies, Organisations or Entities providing a Professional Service Professional Individuals Design Advice Specification Product or Service
What is at risk? Financial wellbeing and safety of the company or organisation in the aftermath of a negligence/damages claim against them Affects the Professional, staff, and family members
Why buy PI cover? Legal requirement Regulatory requirement Practicing requirement Contractual requirement Protection (against risks exposures and defence costs)
Where could claims come from? Any Third Party with whom the Insured enters into a contract with Any Third Party who suffers Injury or Damage due to the Insured s alleged negligence during the course of their professional duties Claims could come from anywhere in the world PI exposures range across a multitude of industries and sectors, from auditors to the medical professions
In a nutshell Cover is for professional advice and or services Cover caters for damages and defence costs Declaration based policy Legal liability policy Third party insurance policy Errors and Omissions policy
What is claims made Claims made policy responds to claims made/lodged during the current period of Insurance irrespective of the date of event, but subject to any applicable Retroactive date Retroactive date indicates the date from which insurance was first incepted. This date will be lost in the event that there is a break/gap in cover and work performed prior to this date will not be covered Importance of policy renewal to extend coverage period Policy limits in force when claim is made will apply
Claims made Insurance is active You are NOT covered 1 2 3 4 5 6 7 8 Incident occurs You stop paying premiums
Limit of Indemnity Maximum amount the Insurer will pay for damages and legal costs arising from any one claim SHA capacity is R500 million Limits of indemnity are costs inclusive o Refers to the costs incurred during the investigation / handling and course of a claim and these costs are included in the Limit of Liability and not in addition thereto Three types of offerings: Aggregate Aggregate with Reinstatement Each and Every claim basis/unlimited
Runoff cover When a company ceases trading they are still legally liable for the work performed. There must be cover in place at the time a claim is lodged Cover continues in the form of Run-off cover where: o The policy will respond to any claims arising out of work performed the by the company prior to when the company ceased trading Runoff cover claims cannot benefit from an updated Policy Wording (Expiring Policy wording applies) Renewal of this Policy is subject to: o o o No Claims Declaration No Material Changes to the risk Applicable premiums as set by Insurers
Runoff Insurance is active You ARE covered 1 2 3 4 5 6 7 8 Incident occurs Runoff period kicks in
Why the need for runoff cover? Professional duty to clients does not end at retirement Claims can still come in long after company doors are closed Retirement (smaller firms/sole traders) Business is sold Business is taken over (mergers and acquisitions)
How long should runoff cover be? Professional Bodies can provide indications Relevant limitation periods as set by law Depending on the contractual limitations of liability with clients
Why SHA @PIchief duben@sha.co.za SHA Specialist Underwriters