T81 32 Introduction+to+Professional+Indemnity+Insurance - Unlocked

Slide 1
UIB Innovation Through Expertise

UIB Introduction to
Professional Indemnity
Insurance
Slide 2
INTRODUCTION TO PROFESSIONAL
INDEMNITY
Slide 3
Introduction to Professional Indemnity
Professional Indemnity Insurance indemnifies the Insured for sums which they
may be legally liable to pay arising from claims made by a third party.
These claims must be for a breach of duty in their professional services by
negligent act, mistake, error or omission committed during the policy period.
Professional Activities are usually skilled areas of expertise the Insured is
qualified to do and specialises in and receives fees for undertaking
Slide 4
Introduction to Professional Indemnity
Professions who normally buy Profession Indemnity Insurance
Accountants
Architects
Engineers
Banks and Financial Institutions
Doctors
Insurance Brokers
Quantity Surveyors
Claims can arise from:
Breach of Professional Duty
Breach of Copyright
Breach of Confidentiality
Medical Malpractice
Libel and Slander
Loss of Documents
Slide 5
HOW LIABILITY ARISES
Slide 6
How Liability Arises
Breach of Contract
Negligence
Breach of Duty
Defamation
Breach of Intellectual Property Rights
Slide 7
Breach of Contract
Professionals can be sued for breaching:
an implied term in the contract
an express term in the contract
Implied terms exist whether or not they have been expressly agreed. It is an
implied condition of professional services contracts that the professional should
act with reasonable skill and care. Claims for beach of implied term essentially
allege negligence.
Some professionals whose service provides a product(e.g. in the construction
or Information technology fields) are occasionally under a more onerous implied
termthat what they provide is fit for its purpose.
There may also be express conditions in a written contract, which seek to
broaden the professionals duty further and these will be the subject of
commercial negotiation between the professional and their customer. If the
professional breaches these terms they may also be sued e.g. for breach of
warranty.
Slide 8
Breach of Contract
Breach Of Contract Breach Of Implied
Term
Breach Of Express
Term
Definition Contractual term which
is implied by
relationship whether or
not parties have
expressly agreed it
Contractual term
expressly agreed by
parties
Example Professional uses
reasonable skill and
care
What professional
designs and supplies
must be fit for purpose
Professional guarantees
performance of work.
Professional agrees to
deliver work by certain
date.
Slide 9
Breach of Contract vs. Negligence
Negligence
Breach of Contract
or Negligence
Slide 10
Negligence
Professionals will also owe a duty of care to third parties other than their
customers. They are not expected to be perfect lawyers lose cases, surgeons
do not save every life.
As with all negligence cases the claimant will have to prove:
the professional owed them a duty of care
the professional breached a duty of care
the breach of duty caused the claimants loss
Foreseeability is often identified as a fourth requirement (i.e. that the profession
should have been able to foresee that their breach would cause damage to the
claimant), although this is tied closely to the duty of care.
Slide 11
Duty of
care owed
Breach
of duty
Foreseeable
that breach
would cause
damage
Breach of
duty caused
damage
Negligence 4 Steps
Slide 12
Breach of Duty
It is not enough to simply prove duty of care the claimant must also prove breach
of duty i.e. the professionals work fell below an acceptable standard.
The courts accept that lawyers lose cases and doctors lose patients but will seek
to establish whether the professional has fallen below the standard expected of
them.
Professionals thus owe a duty of care which is considerably higher than a
reasonable man but are not expected to be the best in the business. It is also an
objective standard of care i.e. a junior professional owes the same level of duty
as a more senior professional in that firm.
The courts can expect a higher standard of care in some professions than others
e.g. the standard of care expected of a solicitor is typically very high as they are
expected to know the law or refer the case to a specialist where they do not.
When such cases come to court, typically the defendant and the claimant will use
expert witnesses from the profession to opine on what would be considered
reasonable or average practice in that profession to establish whether the
professional had fallen below that benchmark.
Slide 13
Defamation
Broadly one can say that slander is a defamatory remark made orally i.e. spoken
whilst libel is a defamatory remark in writing.
All professionals could potentially defame their competitors or potentially their
customers in their brochures or on their web site.
Professionals can also be sued for breaches of intellectual property
Types of breaches include:
Patent the professional breaches anothers registered right to an invention
Breach of copyright/music rights/broadcasting rights the professional
breaches the legal right to publish some work
Passing off the professional has imitated their trade name and logo and
passed it off as their own
Trademark the professional has copied their trademark
Plagiarism the professional has appropriated their ideas and passed them off
as their own
Breach of Intellectual Property
Slide 14
Professional Indemnity vs.
Public Liability
Injury/
Damage
Financial Loss
(No Injury/Damage)
Advice
Not Advice
PI
PI
No Cover PL
Slide 15
COLLATERAL WARRANTIES
Slide 16
Collateral Warranty
Occupier Developer Architect
Collateral Warranty- a contract collateral to (or alongside) another contract
which creates a contractual relationship, where otherwise none would exist
Collateral Warranty
Slide 17
Collateral Warranty
A Collateral Warranty provides reassurance to the occupier (in the example
above) that should the Developer cease trading they have rights of recourse
against the original Architect.
It provides a contractual relationship between the Occupier and the Architect
which would not normally be given should the Collateral Warranty not be in place.
Insurers are concerned about collateral warranties as their mere existence
potentially creates additional duties of care for the professional. As they can also
be assigned to other parties (e.g. from tenant to sub-tenant) the professional can
end up owing duties of care to parties quite remote from the original work.
Slide 18
RETROACTIVE COVER AND CLAIMS MADE
Slide 19
Retroactive Date
Policies will also often contain a retroactive date as insurers often do not want to
cover claims arising from historical activities of which they are not aware. Claims
made during the policy period, but arising from acts prior to the retroactive date
are not covered.
When an insured changes insurer they need to be careful to ensure that the
retroactive date does not change to ensure full continuity of coverage. If there is
no retroactive date then all claims made in the policy period will be covered
regardless of when the act which gave rise to them was committed.
Professional Indemnity Insurance only covers claims made during the policy
period of claims made after the policy period which arose from circumstances
advised during the policy period.
Slide 20
Retroactive Date
Ideally the retroactive date needs to go back to the first date Professional Services were
provided.
Claims in Scenario 1 and 2 below are covered,
Claims in Scenario 3 would not covered.
Slide 21
POLICY STRUCTURE
Slide 22
Policy Structure
Professional Indemnity policies have a number of different structures:
Most will have an each and every claim limit i.e. the maximum amount that can be
paid out for each individual claim.
And an aggregate limit i.e. the most that can be paid out per policy period.
An excess is also applicable to every claim including or excluding defense costs
and expenses
Policies can be structured including or excluding defense costs and expenses in
the total aggregate limit
Policies excluding defence costs are normally for smaller organisations
and are generally much more expensive
Slide 23
Policy Structure
Damages
+
Claimants
Costs
+
Defense
Costs
AED 5M
Costs
Inclusive
Damages
+
Claimants
Costs
AED 5M
Costs
In Addition
Defense
Costs
No Limit
Slide 24
Common Policy Extensions
Cover additional liabilities
Breach of Copyright
Cover other costs incurred
Court Attendance Costs
Cover first party costs
Loss of Documents
Fidelity
Cover costs of avoiding claim
Rectification costs,
Fee recovery
Mitigation Costs
Slide 25
Common Professional
Indemnity Exclusions
Bodily Injury/Property Damage not arising from breach of professional duty
Dishonesty
Insolvency/Bankruptcy
Acts as directors or officers
Fines & penalties, punitive damages
Contractual Liability restrictions
Breach of copyright
Terrorism/Asbestos/Toxic Mould/Pollution
Slide 26
SINGLE PROJECT AND ANNUAL
RENEWABLE POLICIES
Slide 27
Single Project and
Annual Policies
Professional Indemnity Policies can be bought for specific single projects or
to cover all the activities of an Insured.
Single Project policies are for a set period of work, plus a maintenance period
and then an extended reporting period, with the premium paid in one
installment at the start of the policy (Sometimes this is adjustable on
completion of the building works)
Annual policies are annually renewable and based on the last complete
financial years fees. This covers all work undertaken subject to policy terms
and conditions.
Due to the nature of Professional Indemnity Policies being claims made and
having a retroactive date, if an annual policy is purchased it must be renewed
each year in order to retain coverage for past liabilities.
Slide 28
Single Project non-binding Very
Rough Indication (VRI) Form
Should Amana
require a quotation
for a Single
Project policy UIB
have provided this
form to provide the
essential
information for a
quick turnaround
Slide 29
Underwriting Considerations
Type of Profession
Fees split by type of work
Size of their clients
Size of the Insured's contracts
Experience of the principals
Ratio of qualified to unqualified staff
Amount of sub-contracted work
Location of the Insured
Claims experience
Limit and excess options requested
Risk management (including contractual controls)
Slide 30
CLAIMS AND RISK MANAGEMENT
Slide 31
Common Causes of Claims
Absent or incomplete documented office procedures
Absence of terms of engagement/contract details
Non-compliance to check and sign off procedures
Professional staff operating outside authority levels
Professionals operating on their own
Incomplete case and claim file records
Absence of standard report clauses/disclaimers
Absence of recruitment guidelines and failure to take up employer references
Records not retained for the minimum length of time.
Slide 32
Risk Management Controls
A great many misunderstandings (which later become formal claims) can be
avoided if written documentation is created and retained. This is especially
important when the verbal instructions involve:
Changes in the initially agreed-upon scope of services,
Changes in the original fees for those services,
Instructions from clients, which give The Amana Group the authority to
pursue a specific course of action on your clients behalf.
The Amana Group should document all file activity - thorough, accurate file
documentation and adequate document retention practices will often provide a
professional firm with its strongest single piece of evidence that services were
properly performed. Although additional time is required to maintain detailed
records of actions, procedures, and decisions, such information is essential in
defending all types of claims. Documentation is so important that, in some firms,
the extent to which professional employees record their activities in client, case,
or project files is considered in periodic performance reviews.
Slide 33
Risk Management Controls
Documents to be retained by The Amana Group
When engaging subcontractors The Amana Group should always maintain up to
date records of their subcontractors including:
Any trade licences they hold which are applicable to the work they are
undertaking
Other information which may be useful:
Copies of their Insurance Certificates including but not limited to Professional
Indemnity, Third Party Liability and Workmans Compensation.
Details of experience of principles, their qualifications and details of past projects
Slide 34
AMANAs PROFESSIONAL INDEMNITY
POLICY
Slide 35
The Amana Group have an International Program:
USD 10,000,000 any one claim limited to USD 20,000,000 annual
aggregate across all territories
USD 300,000 excess in respect of each claim including defense costs and
mitigation losses
Mitigation costs limited to USD 1,000,000 each and every claim this
forms part of the overall USD 10,000,000 any one claim limit and is subject
to the USD 300,000 excess
Amana Policy Specifics
USD 300,000
Excess
USD 20,000,000 in the
annual aggregate
USD 10,000,000
any one claim
Slide 36
Amana Policy Specifics
New Extensions include the following:
Joint Venture Clause
Provides cover for work undertaken in a J V providing Amana has management
control
Self Employed Person
Cover for contracted hire staff/self employed working for Amana Group
Libel and Slander
Committed in good faith by and employee
Loss of Documents
Costs for replacement and restoring lost of damaged documents
Innocent Non Disclosure
Providing notification/disclosure requirements are followed the Reinsurer will not have
grounds to reject a claim for Innocent Non Disclosure
Loss of Use / Consequential Loss
This provides Amana Group with far wider cover as you are now insured for 3rd party claims
for loss of use / consequential financial loss as a result of your negligence in design
Slide 37
Claims Introduction
What to notify?
Any verbal or written demand for a claim from a client for damages
A claim from The Amana Group for mitigation costs in order to prevent a
circumstance that may later lead to a claim
When to notify?
As soon as possible and without delay. All claims must be notified within 30
days of Amana becoming aware of the initial circumstance which may give rise
to a claim under this policy.
Who to notify?
The Finance Department of Amana Group Corporate Office, who intern will
notify Insurers within 30 days of discovery of the circumstance
How to notify?
Initial verbal notice, followed by written notice with essential points: these are
best covered by completing the Preliminary Loss Reporting Form
Slide 38
Preliminary Loss Reporting Form
Date of notification to
Amana:

Project Name:

Outline of the project
where the claim has
arisen. Including total
contract value and
portion of which Amana
are responsible for:

Brief description of the
claim:

Estimated quantum of
the loss:

Attachments :

Description of the Contracts
Notification received from claimant
Design documentation
Other useful supporting information
Details of subcontractors and their Insurances

Amana Contact person
for additional information

Name:.Title:.

Email: .Tel: .
Name of person that
reported loss:

Date of Reporting:

Signature:

Slide 39
What not to do in a Claim
Particularly related to Professional Indemnity Claims but applying to all insurance
cover generally: YOU SHOULD NOT admit any liability or assume any obligation
and make any statement which would suggest that Amana or any of its staff is at
fault.
YOU SHOULD NOT discuss the claim with the Claimant without Insurers prior approval of
the communication
YOU SHOULD NOT give to other parties any documents without clearance from your
Finance Officer and UIB.
YOU SHOULD NOT arrange, offer, promise or make any payment in respect of any event
or mishap or loss, which may reasonably be foreseen to be likely to give, rise to a claim.
YOU SHOULD NOT incur defence costs you may wish to later claim back from Insurers
without their written consent. Insurers may also wish to appoint specialist lawyers to handle
the claim.
YOU SHOULD NOT incur mitigation loss costs without prior written approval of your
Insurers
Slide 40
What to do in a Claim situation
Try your best to minimise injury or damage for which Amana is wholly or partially
responsible i.e. as if no insurance cover is available.
Co-operate fully with any loss adjuster/claims handler appointed by UIB/the
insurers.
Provide your Finance Officer/Manager of Internal Controls & UIB with all such
further particulars, proof and information (e.g. retention of damaged goods for
inspection/salvage; provision of witness statements/internal investigation reports;
provision of relevant estimates/invoices and contract documents) with respect to
the claim and circumstances under which the loss or damage occurred, and any
other matter relating to the liability or the amount of the liability.
Forward every letter, claim, writ, summons (if any) to your Finance
Officer/Manager of Internal Controls and UIB immediately on receipt of the same.
Slide 41
UIB Dubai LLC,
No. 1901-2a, 014 Tower,
Business Bay, Dubai, U.A.E.
Mailing Address: P.O. Box 8832, Dubai,
U.A.E.
Tel: +971 (0)4 294 8666
Fax: +971 (0)4 294 8388
Mob: +971 (0)50 64 00 172
Email: uibdubai@uibgulf.com
Website: www.uibgroup.com

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UIB Innovation Through Expertise

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