Keep it covered

first_img Comments are closed. Keep it coveredOn 1 Jul 2004 in Personnel Today Professional indemnity insurance should protect you against claims made arisingfrom your work. And despite the growing ‘compensation culture’, good cover isstill available. By John D WrightWe hear a lot about ‘compensation culture’. This has been a long-standingfeature of life in the US, and has now reached the UK, putting a real strain onthe reserves of insurance companies. Claims by employees injured at work and professional indemnity claims leadthe field, resulting in a very sharp increase in premium rates, and evenwithdrawal of cover in some cases. The reasons for this are not under discussion here, but the input of riskmanagement procedures, such as rehabilitation and OH training, is ofconsiderable interest to insurers. More communication is needed with senior UK underwriters, but in themeantime, there is a huge growth in the demand for health and safetyconsultants and OH therapists. This will bring with it an increased demand forprofessional indemnity insurance. Duty of care A professional indemnity policy insures the legal liability of aprofessional arising from their work activities. As with all business transactions,such liability may arise in contract or in tort law. Most claims are based onthe contract itself, but at the same time may be tort related, that is,negligence is a common feature. This concurrent liability in tort and contractis well established in English law. The duty of a professional adviser is one of reasonable skill and care. Thisis not a duty of perfection, but one where he or she must act and show the samelevel of care as others in the same profession. If, however, the individual claimsto be an expert in a particular area, for example, on stress management, theywill be judged on the higher level of expertise that they profess to offer. Most insurance policies are written on an errors and omissions basis, whichis sufficient to cover the reasonable skill and care duty. However, some claimsmay arise purely because the contract terms have been broken, irrespective ofnegligence. Much depends on the wording of the contract, and care is neededbefore signing a contract that creates a legal liability that goes beyondreasonable skill and care. Some insurers will offer cover on a full civilliability basis, which will include breach of contract, but such cover is notwidely available in the present difficult market. What the insurance covers Professional indemnity insurance is a mystery to many people, but there isno logical reason for this confusion. The purpose of professional indemnitycover is no different to any other type of insurance – to transfer thefinancial burden of risk to another. There are, however, a few basic featuresthat require explanation. Cover is written on a ‘claims made’ basis. This means that any claim must benotified in the current insurance period. So, as soon as you are aware of aproblem with a client, you should notify the insurer, even if a formal claimhas not been made at that point. The indemnity limit may be expressed as ‘aggregate’ or ‘each and everyloss’. The latter is preferred as it allows for more than one claim in theinsurance year, each up to the stated limit. On an aggregate basis, themonetary limit reduces by the amount of the first claim, possibly leaving thepolicyholder exposed on future claims. Legal costs may be payable either as part of the indemnity limit or inaddition to it. Again, the latter is preferred. The first part of any loss is excluded, for example, an excess ordeductible. This is usually a minimum of £500 for each claim, and may be muchhigher for larger risks. Legal costs may be inclusive or exclusive of theexcess. The latter is preferred because a claim may be investigated and, ifsuccessfully defended, the insurers will be responsible for the costs. Only the declared activities are insured. It is essential, therefore, toensure that the schedule in the policy accurately describes the work carriedout. When cover is first taken out, it only applies to claims made on or afterthe inception date, in respect of services carried out from that date. It ispossible, however, to cover claims made in the future in respect of servicescarried out prior to the inception date. Any date can be specified, providedthe proposer is not aware of any pending claims or circumstances when takingout the policy. Policy restrictions and excesses All insurance policies carry restrictions in cover because insurers cannotafford to leave the covers open ended. They can only underwrite a businesswithin acceptable parameters. In professional indemnity, it is usual to limit liability to negligent acts,errors or omissions – to comply with the duty of reasonable skill and careoutlined earlier in this article. Insurers would, therefore, exclude liability that arises out of the givingof any express guarantee or warranty. So care is needed before entering intoany formal contract with a client. If a written agreement is required, ensurethat you are not giving any onerous promises. Seek legal advice if in anydoubt. On the other hand, a clearly stated agreement setting out the scope ofthe services on offer will at least avoid disputes as to the extent ofliability at the end of the day. Other exclusions relate to punitive or exemplary damages, work in the US,insolvency of the policyholder, bodily injury and damage to property claims.The latter should be covered by a public liability policy, but the wordingneeds to be dovetailed correctly between the two policies. A policy excess, sometimes called a deductible, is usual in professionalindemnity insurance. This cuts out smaller losses and saves administrationcosts. It is the same principle that operates in motor and property insurance.However, all claims and circumstances must be notified. Leaving insurers out ofthe loop because you think the claim will fall within the excess is dangerous.Insurance cover with legal costs payable exclusive of the excess is available,so notifying should not be a problem. Notifying claims As mentioned above, the insurance is written on a ‘claims made’ basis. Toensure that a claim is made during the currency of the policy, it is essentialto notify it as promptly as possible. However, the condition in the policy not only requires claims to be notifiedpromptly, but also any ‘circumstance’ that might give rise to a claim. A claimis easy to recognise, but a ‘circumstance’ is far more difficult. How do you knowwhen a ‘circumstance’ has arisen? If ongoing advice is not producing the rightresult, this may not be apparent for some time. Even if it is apparent, it maybe thought to be controllable without reference elsewhere. Months could elapse between the start of a problem and a severedeterioration, which results in an accusation. In the meantime, the policy mayhave been renewed, possibly with a new insurer. The nature of the cover means that the new insurer will not pick up theclaim, as it would be deemed to have occurred in the previous period ofinsurance. The previous insurer would not pick it up either, because it was notreported in their period of insurance. Care is needed, therefore, not only in notifying, but when changinginsurers, unless you are certain there are no ‘circumstances’ in the pipeline.A specialist insurance broker will provide ongoing advice at the time of takingout the cover, and again at each renewal date. Examples of claims Claims can and do arise from a range of situations, either from advicegiven, failure to advise, lack of monitoring or failure to warn, breach ofregulations, breach of recommended procedures and breach of confidentiality. Claims may arise from the presence of an OH professional, where noise levelsor dust levels are not monitored correctly. The employer may be in breach ofthe regulations, such as COSHH, but will look to the consultant whose job itwas to monitor the situation. Rehabilitation work is intended to reduce thelength of absence from work, but incorrect advice could have the oppositeeffect, resulting in frustration and possible claims from the injured party aswell as the employer. Market forces The insurance market is difficult at the moment. In the professionalindemnity sector, some 50 per cent of all claims payments relate to the legalcosts involved. Underwriters are reluctant, therefore, to reduce premium rates, and premiumsare likely to remain high for some time. The OH area is, on the other hand,able to secure cover at reasonable rates at the moment. For an individualpractitioner, a premium of £350 for cover of £100,000 would not be unrealistic.Much depends on the fee income and the CV of the individual. An excess of £500is usual, perhaps larger for a bigger consultancy. Although the premium is important, it should not be the only considerationwhen choosing an insurance product. Insurance policy wordings and theinterpretation of them vary. The best advice is to use the services of an insurance broker, preferablyone who is experienced in the professional indemnity market. Alternatively,there may be a scheme cover available, operated by one of the professionalbodies, such as the RCN. – John D Wright is a fellow of the Chartered Insurance Institute and anindependent risk consultant, specialising in professional indemnity insuranceand risk assessment Related posts:No related photos. Previous Article Next Articlelast_img read more

4 roadblocks you can overcome for your first million dollars

first_imgLearn and understand how money worksby: Brandon Turner, EntrepreneurRelaxing vacations on the French Riviera, huge donations to your favorite charity and an early retirement. These are the kinds of things people think of when they hear the word “millionaire.”It’s unlikely you’ll ever experience that. Sorry.Unless, of course, you can overcome the following four roadblocks stopping you from achieving millionaire status. Each roadblock below also offers an “immediate action step” to help you overcome the things holding you back. Let’s get started.1. You don’t understand how money works.Money is not a complicated topic, but still, few seem to really understand how it works. Do you? Sure, you can blame the school system or your parents, but the responsibility is still on you to figure out how money is made, how it is held, how it is invested and how it is preserved. continue reading » 3SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblrlast_img read more