Professional Indemnity - what is a claim?

It is quite likely that the Professional Indemnity insurance premium is one of the largest single outgoings a professional organisation will incur. It is therefore important that all steps are taken to maximise the benefit afforded by this cover by following all necessary requirements of the insurance contract, and to avoid invalidating the insurance by non-compliance.

Professional Indemnity insurance policies are written on a “claims made” basis. This means the insurance policy that responds to the claim is the one in force when the notification is made, and not the policy which was in existence when the alleged error occurred. It is therefore vital that notification is made as soon as you are aware of any circumstance or any claim that is being, or may be, made against you.

Is it a Professional Indemnity claim or a circumstance?

It is extremely important to distinguish between a "claim" and a "circumstance". A claim is usually relatively easy to identify, but often there is a failure to recognise a circumstance, resulting in policy disputes with insurers. As a rough guide, a claim arises where there is an indication from a third party to you of some discontent which will, or may, result in an expected remedy from you. A circumstance is far less obvious, but basically arises where you become aware of an occurrence or problem, where there is the potential for you to be involved by way of remedy, but no formal claim or actual allegation of negligence has been made to you.

Things to remember

In the event of you becoming aware of a claim or circumstance, it is important that you adhere to the terms of the insurance contract in order to secure the full benefit of the policy. This means that you should follow these following basic requirements on each occasion:

• Immediately notify any claim or circumstance to the Centor Claims Team as soon as you become aware.
• Ensure notification is made during the period of the policy during which you become aware of the claim or circumstance.
• Do not make any admission of liability or any offer of settlement to any third party without specific consent from your insurers.
• The involvement of your own insurers should also not be disclosed.
• Once notification has been given, ensure you co-operate fully with insurers or their representatives.

It is important to know the terms of your policy so you should familiarise yourself with it to make sure you comply with all the terms. If you are unsure about when something should be notified then it is best to seek advice from your usual advisor.

For further information speak to your normal Centor contact or David Jacobsen (Claims Manager) on 020 7330 8716.