AL-JARRAH
Brokers & Consultants
Brokers & Consultants
There are three types of PI wording:
1. Negligent act, Error or Omission
This indemnifies the policyholder against loss/circumstances incurred only as a result of their negligent act, error or omission in carrying out the policyholders business. This is the narrowest form of cover.
2. Breach of Duty
A typical PI policy will provide indemnity to the insured against loss arising from any claim or claims for breach of duty which may be made and reported to the insurers during the policy period by reason of any neglect, error or omissions committed in the conduct of the insured!s professional business. Some policies are more tightly worded than others and whilst a number of policy wordings are designed to satisfy a stated minimum approved wording, which makes them easier to compare, others differ dramatically in the cover they provide.
Some PI policies go further than the standard cover and provide indemnity 'for any civil liability'. This covers such areas as breach of contract, libel and slander. (Some standard cover policies may also include libel and slander as extensions to the policy wordings if required.) Because the operative clause of a 'civil liability' policy is so wide, there is normally a long list of exclusions in order to exclude liabilities that should be covered elsewhere - otherwise things like Employers Liability (EL) and Public Liability (PL) might be covered.
• Contractual liability that is not caused by negligence
This is often excluded from PI policies and occurs when a professional signs up to a contract which might impose a liability going beyond that normally expected in law. Examples include liquidated damages e.g. late delivery penalties, or accepting liability for otherwise unforeseeable economic loss e.g. business interruption.
Contractual liability is an important issue so take care when agreeing with clients the responsibilities you will and will not take on. Insurers recognize however, that some professions demand flexibility in that clients may insist on some contractual exposure. In these instances, insurers may offer to cover an element of contractual exposure such as collateral warranties. Always check your policy wording and advise insurers if you do agree to warranties.
• Legal Costs
These are normally covered by PI policies, subject to the insurers' prior consent. They cover the costs of investigation and defense. Assuming the insured (and the insurers) wish to repudiate the claim, it may be necessary to employ legal professionals and expert witnesses. Usually the PI insurers will have arrangements to appoint the necessary representation on the client!s behalf. The costs are sometimes included within the limit of indemnity ('cost inclusive'), or they may be in addition ('cost in addition').
Pay attention also to the policy excess which may or may not apply to the costs and expenses.
The Usual Cover
In addition to the obvious cover, PI policies may often include:
