Navigating professional indemnity: Your comprehensive guide to claims, compliance, and expert support

By Lucy Frost, Regional Claims Manager, Cert CII > Professional Indemnity insurance is commonly procured by businesses offering fee-based advice to clients. Whether acquired as a precautionary measure or due to contractual obligations, the policy serves as more than just a safety net in times of trouble. It not only covers financial liabilities in the event of errors, but also grants access to expert guidance and potential legal defence when facing allegations of professional negligence covered under the policy.

Many policyholders mistakenly believe that a claim only matters when they receive a legal notice. However, insurance policies often mandate the reporting of any situation that could lead to a claim. This means informing insurers about potential issues that may escalate into claims in the future – not just formal legal actions. Failing to adhere to these conditions, known as “condition precedents”, can result in the denial of claims, as established in legal cases like Arch v Philip McCullough. Therefore, it’s crucial to maintain awareness within your business and establish a robust internal communication system to ensure compliance.

Identifying a reportable circumstance can be as simple as a client expressing dissatisfaction with potential financial implications or discovering errors in services provided. While initial intentions may involve resolving these issues outside of insurance, doing so could jeopardise your claim’s validity. Engaging insurers early is vital to meeting policy requirements. In these situations, insurers not only cover costs but also offer guidance, assess risks, and aid in defending, negotiating, or settling claims.

To determine whether an issue qualifies as a “circumstance”, consulting your broker as soon as a problem arises is essential. Once you identify a notifiable matter, promptly inform your designated contact at Howden with a concise overview of the issue. Delaying due to record gathering is unnecessary; a preliminary summary of relevant details is more than enough initiate the process. The objective is to promptly inform insurers to comply with policy terms.

Insurers will guide you on avoiding actions that could harm your position during ongoing discussions and provide insights on collating critical information. Furnishing essential records enables insurers to comprehend the situation, the relationship between you and your client, the nature of the problem, and how to respond to allegations. With comprehensive documentation, insurers can assess policy coverage, discuss legal positions, and advise on managing the situation effectively.

In essence, with the assistance of your broker and insurers, you not only fulfil policy obligations but also gain access to early support and expert advice, ensuring a proactive approach to potential claims.