You see, many people think that their professional indemnity policy will cover all of their liabilities. A word of warning, it won’t because all policies contain exclusions. Furthermore, on average professional indemnity policies contain about 20 standard exclusions.
To help understand these exclusions, we have broken them down into categories.
Here, we are talking about circumstances that lead to a claim that the business owner knew about before purchasing the policy.
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.
Typically, a professional indemnity policy will exclude any fines or penalties. This includes penalties (civil and criminal), punitive, aggravated or exemplary damages.
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
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.
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.
A pi policy will exclude claims caused by dishonest, fraudulent or criminal acts.
Commonly, an exclusion will apply to claims arising from any legal proceeding brought in any court of the United States of America.
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.
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.
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.
In conclusion, not all Professional Indemnity insurance in Australia are the same. Therefore, when comparing policies, don’t just focus on the cost. 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.
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