Professional indemnity claims checklist
If you have professional indemnity insurance and are thinking of making a claim, it helps to have a list of what your insurer needs to know.
Handling a claim depends on the wording of the insurer’s policy – not all events are reportable.
To help, here’s an outline of what most professional indemnity insurers will need to know when you contact them.
When to notify
When your firm should notify the insurer of a claim is important. Many firms are reluctant to talk to their insurers because they fear next year’s premium will sky rocket even if the claim does not proceed.
Professional Indemnity policies generally have a condition where you need to give prompt notice of anything which is likely to give rise to a claim. By not adhering to this condition, you run the risk of an insurer repudiating your claim due to late notification.
It’s a good idea to appoint a senior manager responsible for professional indemnity insurance. They should read the policy terms and conditions to ensure your firm is complying with them. Their role should include deciding when a claim should be notified.
When should an incident be notified?
Notifiable events run to a lengthy list, but the most common are:
- Receiving a formal complaint or letter before action – even if the threat of following through is vague or verbal
- Any ‘circumstances’ your firm considers might lead to a claim, which is a broad catch-all
- Any complaint going through your firm’s grievance procedures
Again the advice would be to notify your insurers immediately.
What does ‘any circumstances’ mean?
The professional indemnity ‘any circumstances’ net is a wide-ranging term that is often open to interpretation.
The rule of thumb is deciding if a day-to-day business event is likely to escalate into something more serious. The rule of thumb would be to notify the insurers promptly if a business events is likely to escalate into something more serious.
The insurer wants to step in as early as possible to reduce their risk. Notifying an incident will not necessarily invoke a premium penalty if nothing comes of the incident.
From your firm’s point of view, not notifying comes with a more serious financial risk.
What to do to make a claim
Deciding if to notify a professional indemnity insurer depends on the circumstances of each potential event.
Speak to the insurer straight away if you receive a letter threatening legal action. Do not respond to the client before discussing what has happened with the insurer.
If a disgruntled client complains about price, the time completing the work is taking or your firm’s service, consider discussing the complaint with the insurer, but keep a detailed record of any discussions with the client for future reference.
If a difficult client is grumbling about your work, keep detailed records and advise the insurer of the potential risk as the case progresses.
The professional indemnity insurer will rule if the notification is late.
If this happens, the insurer is probably challenging one of three issues – the notification should have been earlier; your firm has changed insurers and the provider judges the other insurer should deal with the claim or your firm’s policy has expired and the notification is out of time.
Premiums start from £12.60* a month
*Based on £100,000 worth of cover. Plus insurance premium tax (IPT) currently at 12%.