Kerry London Underwriting News

What is Professional Indemnity Insurance?

Thursday 4th May
What is Professional Indemnity Insurance?
  • Professional Indemnity insurance (PII) is a type of liability cover designed to protect an individual or business against claims made by clients for loss or damage due to negligent advice or services – whether performed for a fee or not. Cover also extends to legal fees and costs incurred in defending a claim. The most common professional liability claims arise from Negligence, error or omission.
  • Any individual or business that provides professional (or quasi-professional) advice, or services to third parties.

Who has to buy it?

PII is mandatory in the UK for solicitors, accountants, architects, chartered surveyors, financial advisers, insurance brokers, and some medical professionals, as they are required by their professional bodies or regulators to have PII. Other professions or quasi-professions that may be deemed reckless to operate without PII include construction professionals such as engineers and Design & Build contractors.

Where we excel

At Kerry London we specialise in construction classes, and we arrange Professional Indemnity cover for many Design & Construct (or Design & Build) contractors and sub-contractors.

Design and Build is a procurement method in which the main contractor is appointed to design and construct the works, therefore appealing at least superficially to Developers / Employers as it gives a single point of responsibility for delivering the entire project.

The contractor may employ in-house designers, or they can appoint third party designers. Either way, under the D&C contract the contractor is always ultimately responsible for the design. If the design element is wholly subbed-out then the risk exposure is described as “contingent”.

Typically, D&C contracts are not simple contracts but are signed “Ëœunder seal’ i.e. as a Deed which extends the period of liability in respect of the project to 12 years following handover of the finished works (20 years in Scotland!).

Professional Indemnity policies are almost always written on a “claims made” basis, providing cover for claims which are made and notified to the insurer during the period of insurance. Provided therefore that the alleged wrongful act occurs and is reported to Insurers during the period of insurance, it will be covered.

However, if the policy is cancelled or not renewed, cover will end and any subsequent claim – regardless of when the wrongful act occurred – would not be covered by the policy. You can see how important it is that we explain to clients how claims-made policies operate and advise correctly regarding residual liability and the availability of run-off cover.

How much cover and at what price?

Standard professional indemnity liability cover from a single provider ranges from £1m, £2m and £5m up to £10m though recently we are seeing the big limits being reined back. For very large risks we see limits of £20m and sometimes even higher. Limits can either be Aggregate (one overall annual Limit of Indemnity) or Any One Claim (theoretically infinite Limits of Indemnity) and can be inclusive of claim costs and expenses or these can be in addition to the Limit of Indemnity.

Policy Excesses can similarly be applicable to claim costs / expenses, or exclusive of costs / expenses. When recommending any particular level of cover we would consider what the proposer is doing and the size of contracts they may be responsible for.

Remember, the D&C Contractor may only be performing a small amount of work himself, and subbing-out the design and other specialist areas of the work but may find himself responsible for the full loss if the design sub-consultant fails to respond. The liability that still exists notwithstanding sub-contracting out the design work is sometimes what is meant by the term “contingent” liability.

Where our Insured is not the Main Contractor but is engaged as a sub-contractor, our insured will often be engaged under what is known as a Collateral Warranty. Some Insurers provide a legal review service of Collateral Warranties.

Where such a service is not provided, we would recommend the Insured seek qualified legal advice however we are able to provide a limited review service ourselves, essentially to advise our Insured regarding whether insurance and liability clauses within the Collateral Warranty are within the scope of the PI policy.

Cost of PI cover depends obviously on perceived risk and basis of cover. We have D&C risks on the books for £2m limit at a premium of £1,500 annual and we have one on the books for £2m limit at £150,000.

Excess Layers:

Many brokers don’t realise that Professional Indemnity can be layered in the same way that Public/Products Liability is. Many markets will write excess layers in isolation above other insurer’s primary layer, and it can be a very cost effective way of achieving a higher limit of indemnity.

But we don’t just do D&C

We can (and do) quote for all types of Professional Indemnity including IT and media risks D&O (Directors and Officers Liability) and Cyber.
Classes handled by Kerry London PI : Almost everything! Most PI and D&O classes. Outside of the Schemes we operate, emphasis is construction and/or property management related. Also Charity Trustees, Management liability for Financial Institutions. Warranty & Indemnity and POSI, Combined PI/D&O/PL/EL, + office risks.

Occupations:

Kerry London have delegated authority by CNA, Hiscox, IGI and RSA which means that we can either quote, bind and issue Professional Indemnity policies, or bind Insurer quotes and issue policies on the following occupations.

  • Accountants
  • Architects
  • Engineers ( including Electrical Engineers)
  • Estate Agents
  • Management consultants
  • Insurance brokers
  • Clerk of Works
  • Design and Construct
  • General Building trades
  • IT Consultants
  • Interior Design ( non structural)
  • Safety Consultants
  • Interior Fittings/Bathroom/Kitchen installation ( non structural)
  • Media
  • Marketing
  • Event management

We will happily look to obtain terms on an individual basis for pretty much any risk you need especially for the Construction industry and supporting trades.

Markets:

Kerry London Limited are a Lloyd’s Broker so if the risk doesn’t fit one of our delegated authority schemes, we can discuss the risk with pretty much all of the London Market – CNA Hardy, HCC, AIG, Axis, RSA, Nexus, IGI, MUM, DUAL, Markel, Endurance, W R Berkley, CFC, QBE, Aviva, ACE, Navigators, Chubb, XL, Canopius, AmTrust syndicate, Amlin syndicate and Vibe syndicate make up only some of the markets that we deal with on a daily basis.

Most insurers publish an appetite list however in terms of Primary business, most lists will appear very similar and will change depending on change in law, environment, claims frequency and severity of any particular profession – it does not take long to know that an insurer is offering a previously taboo product, and it takes one email to find out if they conversely no longer write a particular class.

The PI team currently consists of:

Rebeka Kelly: Account Executive Tel No – 0207 337 4037
Hazel Powell: Account Executive Tel No – 0207 337 4036
Ben Smith: Account Handler Tel No – 0207 337 4038
Chris Watkin: Account Handler Tel No – 0207 337 4050
Karen Bracey: Administration Tel No – 0207 337 4034
Jane Pugh: Broker Development Tel No – 0207 337 4033

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