Imagine how annoying it'd be to pay your business insurance premium month in month out, only to face having your professional indemnity (PI) claims refused.
Very annoying. And potentially costly.
So, Jane Aldous, our customer service team leader, is here to give you the heads up as to why some PI claims are occasionally rejected by insurers.
Not only that, she's got tips on what you can do to make sure your insurance does its job when you need it to most.
Over to Jane....
Having PI claims refused is very frustrating. How can this happen?
If a claim could have been covered, but something has happened to invalidate the insurance, it will be turned down by your insurer.
For example, you might be late telling your insurer of the claim, or you might have attempted to resolve the claim yourself and made it worse. Or perhaps you have a 'financial interest' in the business making the claim against you.
Another important thing to remember is that professional indemnity is a 'claims made' policy. That means to be valid, it has to be running at two important points: when the work in question was done, and when a claim concerning that work comes in.
That can be several years later. Think about how long it can take for problems to emerge with architectural work or management consultancy strategies, for example. If you've let your PI insurance lapse in the meantime, you won't be covered.
Also, it sounds obvious, but any claim is excluded if there's no cover for it under your particular policy. Professional indemnity only covers claims relating to problems in your work, so claims for fee or contract disputes, or work outside your declared business activities are excluded.
OK, so what are the most commonly refused PI claims?
It has to be fee disputes.
Many customers assume they can claim on their professional indemnity insurance if their client is refusing to pay an invoice. And, unfortunately, they can't.
Professional indemnity can only help when a client is unhappy with your work and claims to be out of pocket because of it. If a client's simply giving you the runaround and failing to pay up, you have to chase them yourself.
If however, a client explicitly says they're not paying because they're dissatisfied with your work, then your insurance can help.
Can you give any examples of claims that have been turned down or excluded?
We had a claim from a training company where a student alleged they were unhappy with a course they'd attended. The situation started as a disagreement with a difficult student, so the company initially tried to resolve it themselves. However, things escalated quickly, and the company hired a solicitor before notifying us of the claim.
That was a big mistake. Trying to resolve a claim yourself can prejudice your insurer's position, leaving them unable to help. In this situation, the customer had already made things worse, so the insurer turned down the claim.
Another PI claim we've seen is a freelancer who was also a non-executive director of a client's company. The freelancer tried to use her professional indemnity cover when her client said they were unhappy with her work. Because she had a financial interest in the other company, her insurers turned the claim down.
What should a customer do if their claim isn't covered?
Firstly, don't assume your claim isn't covered without speaking to your broker first. It never hurts to check.
Some insurers offer a legal advice hotline to their customers, which can help you figure out what to do next. Your broker will able to tell you if your insurer offers this service, plus how you can access it.
Some of these claims are avoidable. Do you have any tips that can help?
When buying insurance, never try and fit yourself into an occupation category that doesn't match your business activities.
Insurers tailor policy wordings to cover specific risks associated with different occupations. So, if you're an asbestos consultant and you buy a surveyor's insurance policy, you'll find yourself exposed if you need to claim.
An otherwise valid claim can be turned down for something as simple as late notification, so call your broker as soon as you think there's a problem.
Also, notifying us of a claim that doesn't go anywhere won't increase your premium, so it's better to be safe than sorry.
Are there any other types of insurance that can pick up these excluded claims?
Legal expenses insurance can cover some claims excluded by PI.
Legal expenses cover won't automatically pick up contractual disputes, but there is an extension available that can cover these claims.
Thanks for that, Jane.
No problem. If you have any more questions, feel free to give me a call. My direct dial is 0345 222 5372, or you can connect with me on LinkedIn.
Image used under license from Shutterstock.
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