If you can’t find the answer to your questions below, please feel free to contact us by phone or email.
Professional indemnity insurance is designed to provide professionals with protection from financial loss arising from claims and allegations of breach of professional duty and negligent acts, errors or omissions. A Professional Indemnity insurance contract (policy) is comprised of an operative clause, terms, conditions, definitions of cover, and exclusions all of which outline the obligations between the insurance company and the architect (known in insurance terms as the “Insured”). While there are many versions of professional indemnity insurance policies, the Planned Cover policy is specifically tailored to meet the needs of Australian professionals.
Design and construction are highly complex processes involving all sorts of varying factors from market forces to the extensive and ever-evolving provisions of the Building Code. Even with the application of best practice principles, mistakes can be made and we live in a world where there is an expectation that someone needs to be held accountable for project failures, unacceptable delays, cost over-runs or personal injuries resulting from negligent design.. The commercial undertakings, professional practice responsibilities and obligations expose architects to these risks to varying degrees.
Risk is unavoidable. However, the consequences of risk can be managed- principally, through sound professional risk management, excellent internal practice systems, and with Professional Indemnity insurance in support.
In most states, having and maintaining professional indemnity insurance is also a requirement of registration as a professional.
We live in a litigious society. Rightly or wrongly, causes of action and duties of care are constantly evolving and expanding. In almost every case it is preferable that any person or business has PI insurance if they are providing a specialist service, giving professional advice or providing particular expertise and skill to paying clients. In many cases legislation or entitlement to certain professional memberships makes such insurance mandatory.
P.I. insurance policies come in various shapes and forms but all are designed to provide individuals and practices with support in circumstances where an allegation is made by a client or third party that an “insured” has not met the standard of professional care expected of a practitioner in his/her relevant profession. Some policies have extensions or “additional benefits” to this basic cover. Examples include, but are not limited to the provision of insurance support when responding to registration board or coronial inquiries, where allegations relate to intellectual property or to breaches of contract. It is important to remember that while cover under different policies may vary, all policies will be limited by a pre determined and agreed “sum insured” which will cap the amount of relief or “indemnity” an insured person or practice will be entitled to. Any liability for a claim over that sum insured will necessarily be an uninsured risk and will render the person or practice responsible for that portion of loss.
A professional’s duty of care extends not only to their original client – they are also vulnerable to claims from other aggrieved persons such as future purchasers of the building, contractors or a person injured due to an alleged deficiency in the work. Even if the claim is successfully defended, there may still be a large proportion of unrecoverable legal fees. And if the claim is successful, without insurance, the architect may be exposed to bankruptcy or liquidation.
PI policies stipulate a “limit of indemnity” which is the maximum amount the Insurer will pay on the Insured’s behalf on any one claim. For an extremely large claim, the amount exceeding the limit of the indemnity would be uninsured. It is vital for an architectural practice to consider their risk exposure and purchase what is believed to be an appropriate limit of indemnity. It is prudent to choose a policy that allows the limit of indemnity to be “reinstated” once or twice should the practice be exposed to more than one large claim in a single policy year.
There are a number of considerations which should be taken into account when determining how much cover you or your practice will require to have adequate insurance protection. This is something that you should discuss with your broker or account manager to take advice which is specific and relevant to you and your practice but as a starting point, practices should be mindful that many industries have minimum “sums insured” required for professional association and membership. Think about the sort of work that you do and consult the agreements you are bound by, are there minimum insurance requirements for any particular projects you are working on? The type of projects you are involved with may require special consideration when it comes to determining if you have adequate cover. For example, if you are working on a novel, and therefore higher risk design, you may need to consider what exposure you may have if the design fundamentally fails and if the amount of cover you have elected to purchase will suffice.
Consider also who will be relying on your advice and with whom you will be working on a project. Are your project colleagues and clients reputable or do they have a history of past conflict and litigation? As with many things in life, the past experience can often indicate future behaviour and a serial claimant with a propensity for litigation can materially affect the capacity you may have to settle disputes quickly, commercially and within your sum insured.
Finally you must consider your appetite for risk and what are you prepared to pay for your preferred insurance cover. Policy prices are affected by many factors including for what monetary sum you are seeking to insure under your PI policy and you would do well to try to find a policy which suits your financial budget while providing the maximum amount of cover you are able to justify considering all the risks.
There is always a cost in defending a professional indemnity claim. That cost may be financial, for example the contribution of Professional Indemnity insurance policy excess to any settlement or judgment sum. There may also be non financial costs including personal stress, potential damage to reputation, and sheer volume of time expended in defending a long-running claim. While Professional Indemnity insurance offers a degree of financial protection, the best protection against these uninsured losses is excellent risk management to minimise the risk of claims in the first instance.
Professional Indemnity insurance operates on a “claims made” basis, and the architect/ architectural practice must have a current policy in force when it first receives notification of a formal claim against it, or becomes aware of a circumstance which could conceivably give rise to a claim against it. If a claim is made against a business it is the policy in place at the date of the claim that will respond to the claim, not the policy in place at the time the work was performed. Continuity of Professional Indemnity insurance is therefore essential, preferably with the same insurer, and should be maintained until the practice believes that the risks arising from its past work are negligible.
The ‘limit of indemnity ‘on the policy should reflect both current and past work in nature and size, and allow for potential escalation in claims due to future changes in societal attitudes, the impact of inflation and increasing building costs. The practice should also take into consideration any exposure it may have in relation to personal injury claims.
Each insurance company’s Professional Indemnity insurance policy is different. It is important to choose both underwriters and brokers with extensive experience in both the professional indemnity insurance and construction industry. Specialists may offer additional support services to a business to assist with the practices risk profile and ensure a thorough understanding of the Professional Indemnity insurance policy protection.
Certain market policies may be less desirable on the basis of their specified terms and conditions. These clauses may exclude or restrict cover for activities such as inspections of building work, water ingress claims, personal injury claims or liability for certain kinds of sub-consultants. A thorough review of any Professional Indemnity insurance policy wording is essential. If in doubt, professional advice should be sought.
Planned Cover has been managing the Professional Indemnity insurance requires of Australian professionals for more than 30 years. The Company prides itself on its thorough understanding of the various professions. With this extensive experience Planned Cover has produced a package of services which is unrivalled in the market.
Contact our office and talk with one of our specialist advisors. They will discuss your needs and obtain information to source quotations.
Generally quotations are valid for between 14 and 30 days.
Following receipt of our quotations if you wish to take out cover contact our office. We will arrange to have cover put in place. If the cover is required urgently we can usually arrange for a cover note to be issued.
A cover note is a temporary cover issued usually for 14 or 30 days. During this time insurers may require additional information or a proposal form to be completed. Once this information is provided and the policy is paid for the temporary cover transfers to an annual policy.
A certificate of currency is a summary of your insurance cover. It is a document that is used to show external parties (often landlords, banks and financers, clients etc.) that you have insurance in place. You can contact us at any time to obtain a certificate of currency and provided the policy has been paid for one will be issued. As this document is issued by the insurer, please allow us a couple of days to arrange it.
Generally this type of insurance is offered as a package with multiple sections covering a variety of risks allowing the insured to select what risks they wish to insure. Most business insurance packages allow the following risks to be insured:
(Buildings and/or contents)
|Cover for fire, water or storm damage, impact, earthquake, accidental damage, malicious damage, removal of debris, restoration of records and documents|
|Theft||Cover for burglary and theft|
|Money||Cover for cash on the premises and in transit|
|Business interruption||Covers loss of gross revenue, increased cost of working, loss of rent following an insurable loss.|
|Electronic Equipment||Covers repair or replacement of electronic equipment following breakdown or power surge. Can also extend to cover recreation of data and increased costs|
|Machinery Breakdown||Covers repair or replacement of machinery following breakdown e.g. air conditioning units|
|Liability||Public and products liability (refer separate section)|
|General Property||Covers portable contents items whilst they are on the move and not at the situation of risk|
|Glass||Covers replacement of internal and/or external glass following breakage|
|Tax Audit||Covers the costs of engaging an accountant to assist in preparing your files when your practice is the subject of a statutory tax audit e.g. FBT, GST, PAYG etc. Excludes Directors’ personal returns.|
|Fidelity||covers misappropriation of funds & property by employees|
No. You choose which sections of the policy are applicable to your business.
Business insurance policies generally provide for replacement cover. You should insure for the amount it would cost to replace all of your business contents in the event of a total loss.
The insured should be the legal entity (Pty Ltd or Ltd Company) or individual persons in the case of a sole practitioner/partnership etc.
Theft/Burglary is the most common both at the business situation and of items such as laptops away from the office. Theft is followed by glass, property damage and electronic equipment breakdown.
BUSINESS TRAVEL INSURANCE
Policies cover overseas medical and dental expenses, luggage, repatriation of the traveller, cancellation, resumption of journey, liability, extra territorial workers compensation and other risks associated with business travel.
No. You take an annual policy and declare at the beginning of each policy period the estimated travel for the next 12 months.
Yes the policies cover all directors and employees of the insured business.
Most policies extend to cover accompanying spouse and children. You should check to ensure this cover has been provided.
All annual travel policies limit cover to a maximum period, usually 180 days for any one trip. If a trip is planned beyond the policy limit you can apply to the insurer to extend cover.
If at the time of renewal you have declared leisure travel, cover is granted. Otherwise it is best to advise us so we can inform your insurer. Cover usually will include accompanying spouse and children under 18 years old.
PUBLIC LIABILITY INSURANCE
Public Liability insures your practice for its legal liability to pay compensation to others. The key factor is whether you or any of your employees have been negligent in causing injury or property damage to others. If the answer is yes then a court of law will find your practice to be legally liable. Your Public Liability insurance policy will pay on your behalf, amounts, awarded to third parties for damages and legal costs as well as pay your own legal costs, subject to the limit of indemnity and policy terms, conditions and exclusions.
Professional Indemnity Insurance covers your professional liability; liabilities directly associated with your profession. Public Liability covers your general liability to pay compensation for bodily injury or property damage to members of the public in the course of carrying out your business activities as described in the policy.
Yes. You still require cover for clients visiting your premises and cover for when you are away from your home office on business, e.g. on site. Whilst your home insurance policy will automatically have Public Liability cover, it will exclude any incidents relating to your business.
No. Your practices public liability policy covers directors, executive officers, employees, partners or shareholders of your practice, whilst they are acting in the scope of their employment. If you engage consultants or sub consultants to act on your behalf you should ensure they have adequate public liability insurance of their own for the same limit of indemnity as the consultancy agreement requires.
No. You need to ensure your employees are covered by a workers compensation or similar type policy.
No. Your Public Liability insurance policy insurers your practice for the risks associated with your business. It does not insure anyone else for their risks or business. Your clients should have their own insurance policies to cover their risks. Insurers will allow other parties to be noted as interested parties on your public liability insurance but this does not bestow any rights on these parties to claim under your policy.
Call our office for assistance. All claims are different however generally the claims process for property damage or loss is to complete and sign a claim form and send it to our office with evidence of ownership (e.g. purchase invoice for the property ) and a quote to replace the property with a new item.
Some claims will require the insurer to appoint an insurance assessor to assist with the claim.
For simple claims once the documents are lodged with the insurer, it should take around 14 working days to settle.
More complex claims and claims involving insurance assessors or multiple parties will take longer.
Contact your Account Manager to discuss. We can assist you with your claim and investigate reasons causing any delays.
GENERAL INSURANCE QUESTIONS
Retroactive cover extends the cover of a ‘claims made’ policy to cover new claims arising out of services the insured performed before the current policy year. If a claims made policy has ‘unlimited’ retroactive cover, then the policy generally covers new claims arising out of all past services performed by the insured, no matter how long ago. If the policy includes a ‘retroactive date’, the policy generally covers new claims arising out of past services performed after the retroactive date, but provides no cover for services performed before the retroactive date.
An insurer will either offer unlimited retroactive cover which provides indemnity for any claim or costs irrespective of when the act, error or omission giving rise to the claim occurred. Alternatively, insurers may limit cover to a specific date meaning indemnity will only be provided for any claim or costs where the act, error or omission giving rise to the claim occurred after the retroactive date stated in the policy schedule. If you are taking out insurance for the first time, the insurer may specify the retro-active date to be the date that the policy incepts.
A ‘claims made and notified’ policy means that the policy/insurer that will respond to any notification or claim, is the policy/insurer in place at the time the claim is made against the insured regardless of whether the claim relates to activities performed in a previous policy period. This is in contrast to an ‘occurrence based policy’ where the policy/insurer that responds to the claim, is the policy/insurer in place at the time the activities relating to the claim was performed.
Insurers will require a proposal form completed, a copy of which can be sent to you via email, fax or post upon request. Quotation terms are usually valid for 30 days.
All professional risk policies can be purchased as a stand-alone policy. There are also various policies available that package some or all of the risks into one policy. Cover varies from policy to policy.
If you do not renew a ‘claims made’ policy like professional indemnity insurance, then you will have no cover for any claims that arise in the future – and that includes new claims arising out of any of your past services. Your old professional indemnity policies will not provide cover for new claims. You will only have cover for claims made and notified to the insurer before your last policy expired. Unless you are confident that the risk of new claims is low and you are prepared to bear that risk without insurance, it is prudent to continue renewing ‘claims made’ insurances.
The term ‘run-off’ is used in different contexts, so seek advice from a broker
about what it means in a particular circumstance. Most commonly, ‘run-off’
cover means the professional indemnity cover which is maintained even after a person has retired or stopped performing new services.
‘Run-off’ cover is obtained to provide protection against future claims arising out of past services. It is a type of policy that continues to protect your exposure (given the ‘claims made’ nature of a liability policy) after you have ceased practicing. Generally you can purchase run off cover 12 months at a time or in bulk for say 3, 5 or 7 years. The multi-year products generally offer premium savings when compared to an annual policy for the same time frame.
A certificate of currency is a summary of your insurance cover. It is a document that is used to show external parties (often clients etc) that you have insurance in place. You can contact us at any time to obtain a certificate of currency and provided the policy has been paid for one will be issued. As this document is issued by the Insurer, please allow us a couple of days to arrange it.
PROFESSIONAL INDEMNITY INSURANCE
PI insurance is intended to protect a professional if sued for a financial loss resulting from their advice and/or professional services. Anyone who gives another person advice and/or services of a skilful character according to an established discipline might be regarded as a professional.
PI insurance is compulsory for some professionals and elective for others. Either way we highly recommend that you consider this insurance for your business. You may also find that it is a requirement of most of your clients that you hold PI insurance.
This will vary from one profession to the next but all professionals are expected to possess a standard of expertise. If you fail to exercise or achieve that level of expertise in the performance of your role, and as a result, loss or damage is sustained to other parties, there is every prospect that legal action will be brought against you seeking financial compensation by way of damages for any loss which results from your breach of professional duty.
DIRECTORS AND OFFICERS INSURANCE
A D&O policy is designed to protect the personal assets of directors or officers by providing indemnity for any loss arising from a claim as a result of a ‘wrongful act’ (as defined in the policy) committed while they are carrying out their duties and obligations in their position as a director or officer.
Directors and officers of companies can be held liable for their own actions as well as the actions of others and are subject to increasing regulation and scrutiny. It is important to remember that even if the director or officer is innocent, the defence costs of a D&O claim may put personal assets at risk.
Claims against directors and officers fall into the following categories:
Shareholders alleging that the director or officer mismanaged the operations of the company and its funds.
Regulatory authorities holding directors and officers personally liable for breaches of legislation. For example the Australian Securities and Investments Commission can take action against directors and officers it believes have breached the Corporations Act, or the Australian Competition and Consumer Commission can bring actions against executives they believe have participated in restrictive trade practices such as price fixing.
Employees alleging discrimination, harassment, breach of employment contract, defamation, misleading misrepresentation, wrongful discipline, etc. Please note this coverage will generally be offered as an optional extension for Employment Practices Liability.
Creditors alleging that the director or officer allowed the company to trade whilst knowing it could not pay its debts.
Competitors bringing actions against executives for defamation, infringement of patent or copyright and the numerous areas within restrictive trade practices (e.g. price fixing, collusive conduct, predatory pricing etc).
EMPLOYMENT PRACTICES LIABILITY INSURANCE
EPL is designed to assist employers to reduce the legal?? cost exposure and business stress associated with employees taking action against them for claims such as alleged discrimination, harassment and unfair dismissal.
Harassment claims are the most frequent with sexual harassment topping the list. Unfair dismissal and discrimination claims are also common.
Not even the best human resources practices can prevent claims. An EPL policy can provide such coverage as:
• Wrongful refusal to employ a potential employee
• Wrongful failure to promote an employee
• Wrongful demotion, negligent evaluation, negligent reassignment or negligent disciplinary action
• Wrongful dismissal of any employee
• Workplace harassment (sexual or otherwise) of an employee
• Unlawful discrimination
STATUTORY LIABILITY INSURANCE
Statutory Liability provides protection against fines or penalties arising out of breaches of Acts of Parliament, plus the legal costs accrued in defending the prosecution.
What types of claims commonly arise?
Breaches of OH & S and Environmental Protection laws are the more common claims for consultants.
These policies provide protection for the monetary cost of fines and penalties arising out of breaches of legislation. In addition these policies cover the legal costs associated with defending the action brought by the government or government authorities.