Know what to look out for when it comes to professional indemnity insurance
1. Business activities
Your business description must accurately describe your business activities.
Example: To an insurer, a mechanical engineer working on the mines has a very different risk exposure to a mechanical engineer working on building services. Failing to adequately disclose the extent of your business activities can affect your cover in an insurance claim.
2. Your retroactive date
Changing your PI insurer? Make sure your retroactive date on your new policy matches your old policy.
If your retroactive date on the new policy is later than that on your current policy, you will have a significant gap in insurance cover for your past business activities.
3. Check your policy exclusions and Limits of Liability
Does your PI policy exclude or have very limited cover for bodily injury and/or property damage? Is this an issue for you?
At first glance, PI Insurance policies often appear as though they have a $10 million Limit of Liability for bodily injury/property damage that is deemed have occurred as a result of your work.
In actual fact, it is very common for a cover exclusion to apply here (i.e. there is no cover) or for a $250,000 sublimit to apply. A $250,000 sublimit means that within the $10 million limit, you would only be entitled to a maximum payment of up to $250,000 for bodily injury/property damage claims.
If this applies to you and presents an issue, we recommend asking your insurance broker to explore additional cover options.
4. Have there been any changes within your business? It’s your duty to disclose.
At any time, if there is a change in your business activities or in a potential claim, let your insurer know.
Under the Insurance Contracts Act 1984, the insured has a duty to disclose to the insurer anything that may increase or change their level of risk — for example, a change in your business activities or a claim notification.
If you do not disclose potential claims or key changes in the scope of your business activities to your insurer, you could be left without cover in a claim.
5. Is your PI insurance part of a group policy?
EngInsure only recommends and places PI insurance policies with standalone policy limits, which ensures that clients have their own full Limit of Liability.
A group PI insurance policy means that you are sharing the one policy limit with numerous other entities. If you choose to take out this type of PI insurance, it is essential to understand that the total Limit of Liability can be eroded by other clients sharing in the same claims ‘pool’.
Example: A group PI insurance policy has 10 members, and the policy limit is $20 million in total. If two members of the group have claims paid out at $10 million each, it means the policy limit has been exhausted, and there is no cover left for the remainder of the policy period for any members.
Ensure your business has the right cover, so you can focus on what you do best.
As experts in PI insurance for engineers, EngInsure delivers professional, impartial advice, while providing access to exclusive risk placement facilities.
Need assistance? Speak to an EngInsure Adviser: 1300 854 251 | enginsure.com.au
This information is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as EngInsure Insurance & Risk Services for further information, or refer to our website.
