What Exclusions do Professional Indemnity Policies have?

What Exclusions do Professional Indemnity Policies have?

Many people think that their professional indemnity policy will cover all of their liabilities. A word of warning, it won’t because all professional indemnity policies contain policy exclusions. To fully understand what does professional indemnity insurance covers, it’s critical to know that on average professional indemnity policies contain about 20 standard exclusions that can lead to Financial Losses if misunderstood.

To help understand these exclusions, we have broken them down into categories, based on common policy wording and Scope of Coverage limitations.

Key Professional Indemnity Exclusions

Prior Reported or Known Circumstances

Here, we are talking about circumstances that lead to a claim that the business owner knew about before purchasing the policy. These are often referred to as Known Claims or a Known Claim or Circumstance under Claims made professional indemnity policies.

Retroactive Date

Claims arising before the retroactive date, which is specified in the policy schedule. Normally, the retroactive date is set at the date you first purchased professional indemnity insurance, which is particularly relevant for legacy projects.

Fines and Penalties

Typically, a professional indemnity policy will exclude any fines or penalties. This includes penalties (civil and criminal), punitive, aggravated or exemplary damages, regardless of the policy limit.

Assumed and Proportionate Liability

In 2001, Proportionate liability legislation was introduced in every State and Territory in Australia. The purpose of proportionate liability is to reduce your liability to what it would be at law. When it comes to a claim, it makes sense that you should only be liable for the loss that your business is to blame for. This is fair and reasonable, right? Well, unfortunately a business might assume 100% of liability under a contract. This might even be where you are not even to blame for the claim. Therefore, it’s important to understand that your professional indemnity will exclude this assumed liability.

Generally, your policy will exclude a claim where the contract liability is different to what would have applied at law. This exclusion under a pi policy is commonly referred to as a ‘contractual liability’ or an ‘assumed liability’ exclusion. To get more information on proportionate liability, read The Fold Legal’s blog about using insurance to make contract terms fairer

Refund of Professional Fees and Trading Debts

Commonly, pi policies will exclude claim relating to refunding professional fees. Likewise, a pi policy will also exclude claims arising from a liability to pay trade debts or the repayment of any loan.

Related Parties

Unlike public liability policies, pi insurance policies have an exclusion for claims made by parties insured under the same policy. This is known as either a “related parties” or “insured vs insured” exclusion. Most importantly, this means that if you name another party on your professional indemnity policy, it won’t respond to a claim if it’s made by that party.

General Exclusions

Dishonest or Wilful Acts

A PI policy will exclude claims caused by dishonest, fraudulent or criminal acts, including Criminal Acts, Intentional Acts, and Fraud And Dishonesty. These exclusions may also extend to misuse of intellectual property, Intellectual Property Rights, or intellectual property infringement, including Infringement of Patents.

Jurisdiction Limit

Commonly, an exclusion will apply to claims arising from any legal proceeding brought in any court of the United States of America.

Risks Covered Under Separate Policies

To avoid confusion, professional indemnity insurers exclude claims that should be covered under separate policies. As a result, you will find exclusions for Directors and Officers Liability, Employment Liability (including Workers’ Compensation), Products Liability and Pollution Liability. Claims involving Bodily Injury or Property Damage are usually addressed under other insurance types.

Standard Exclusions that apply to all Business Insurance Policies

All business insurance policies have standard exclusions, relating to Radioactive Contamination, Insolvency, Terrorism, War, Asbestos. Also, claims that would be in contravention of any Trade or Economic Sanctions.

Specific Exclusions for Certain Occupations

For many professions, an insurer would apply exclusions specific to that industry. For example, if you’re a Management Consultant, it is common for insurers to exclude claims relating to investment advice, business valuations or capital raising. Similar exclusions can apply across other Professional Occupations, including IT professionals, media professionals, recruitment agencies, and independent contractors.

Understanding these exclusions through professional indemnity claims examples and knowing key professional indemnity claims to know can help professionals prepare and manage their risks effectively.

Summary

In conclusion, not all Professional Indemnity insurance in Australia is the same. Therefore, when comparing policies it’s important to identify who needs professional indemnity insurance in Australia and understand the professional indemnity insurance cost because it will guide you in selecting the appropriate coverage based on the specific risks and budget effectively while ensuring you are not underinsured. Our advice, check the Exclusions that apply to your quote. To find out what is and more importantly what isn’t covered under the pi insurance policies, simply go to FD Beck’s online professional indemnity online calculator.

FD Beck’s online professional indemnity online calculator . Answer a few simple questions to get your instant online quote. Our online calculator has almost 150 professional occupations to choose from.

For over 100 years, FD Beck has protected Australians. Rest assured, we have the knowledge and expertise to handle every aspect of your insurance needs.

Blogs Related to Professional Indemnity Insurance

Ask Our Award-Winning Insurance Brokers!

With the right professional indemnity coverage, you can focus on your professional work and have peace of mind knowing that you’re protected from potential legal risks.