How do Professional Indemnity (PI) policies respond to a claim?
PI policies are liability policies and so respond when an insured is aware of a circumstance or a claim that may be made against them. Unlike most insurance policies, PI policies are written on a “claims made” basis. This means that it is the PI policy in place at the time the circumstance arises, or claim is made against the insured, that responds.
Although often the case, the claim does not have to come from a party for whom the insured is working; it can be brought by anyone who believes they have suffered a loss due to the insured.
What is a "claim" and what is a "circumstance"?
All PI policies contain strict notification conditions, which require the insured to notify insurers once they become aware of a circumstance which can develop into a claim against the insured. The definition of a circumstance will depend on the policy. The insured should ensure that they are familiar with the definition of a circumstance within their particular PI policy. Failing to notify a claim or circumstance within the required timescales could result in a claim being declined, so it is important that you familiarise yourself with your policy wording.
At what point does a complaint about a circumstance become a claim? Unfortunately, there is no definitive answer; each case needs to be judged on its own merits. Our advice is for the insured to contact their broker and/or the Tokio Marine HCC claims team, who will consider whether this is something which should formally be notified under the policy. When in doubt, it is always better to seek guidance from an insurance professional as to whether the matter should be notified.
What if the insured doesn't want to notify?
Some insureds are concerned that their premium will increase if they notify a circumstance or claim. If insurers pay out on a claim then it is possible they will adjust terms at the subsequent renewal if they feel the individual risk now has a greater exposure than first perceived. Some insureds can have a high number of notifications given the nature of their work. This will not cause the underwriter to adjust the premium unless they feel the risk has a greater exposure.
Important considerations for any PI claim
Documentary evidence
When a circumstance arises or a claim is first made against an insured, all the information and facts should be collated in order to assist us in making a decision: firstly on whether the policy responds to the matter that has been notified; and then whether to defend the claim or deciding on the best approach to manage it through to settlement. This task can be made much more straightforward if the insured has a complete file which contains written documents setting out clearly their role in the project and any amendments made during the project.
Contracts
A number of professionals enter into business relationships without a standard written contract in place. Not having a written contract in place leaves a professional very exposed. The contract can protect them, not just by limiting their liability but also by setting out exactly what is expected of them and what work they will do.
Experience
Another common cause of claims is an inexperienced member of staff being allowed to undertake work, without being properly supervised. We have seen claims resulting in over £1 million being paid out to rectify the work of an inexperienced member of staff. A PI policy might not respond in a situation where there has been inadequate supervision, so it is essential that an insured regularly review their working practices to avoid such situations.
Procedures
It is not uncommon for claims to arise due to a lack of procedures or a failure to follow the sign-off procedures. Frequently, staff members work within authorities or limits of responsibilities which, during busy periods or work, can get missed or overlooked. Frequently, claims occur when insureds have failed to follow their usual procedures, or they have no procedures to ensure that work is done correctly.
TOKIO MARINE HCC CLAIMS
All PI claims are handled in-house by Tokio Marine HCC’s team of specialist claims underwriters in our Bridgend and London offices. We provide a bespoke service where each claim is allocated to a dedicated and experienced claims underwriter, meaning direct access to a decision maker for brokers and insureds.
We have a panel of highly skilled and experienced solicitors, with whom we have developed long term relationships, who are able to handle the wide range of professions which we write at Tokio Marine HCC. Whilst they are able to provide legal advice, they are also aware of the complexities in dealing with insureds and handling sensitive issues.
To handle a PI claim successfully it is essential that the insured provide all the necessary information and evidence. Where possible we will allow an insured to try and resolve any disputes with Tokio Marine HCC remaining in the background by drafting correspondence and other documents for the insured to send themselves. We understand that often an insured's reputation may be at stake, as disputes are often with their clients, and so the insured will know the client best.
If you have any questions regarding Tokio Marine HCC Professional Indemnity claims, please contact the claims team by emailing [email protected] or by calling +44 (0)20 7702 4700.
