Professional Indemnity Buyers Checklist

16th August 2010

 

Professional Indemnity Buyer's Checklist

Before answering the following Questions do the following:_

  1. Read the Policy Definitions- make a note of key points
  2. Read the Exclusions – does anything strike you as unacceptable?
  3. Read the Insuring Clause/es – Do they appear to give you the cover you expect?
  4. Read the FSA requirements set out above.- refresh your memory as to what they require of the PI policy.
  5. Now answer the Questions belowin the order that they appear.

Insuring Clauses

  • Is your cover full Civil Liability or Negligent Acts errors and Omissions?
  • Do you understand the difference?
  • Does the insuring clause make sense to you?
  • Does the insuring clause exclude anything?
  • Does the cover you understand you have bought meet the cover your need? (Set out your needs and make a careful comparison).
  • Is the wording clear and unambiguous?
  • Are any restrictions or any requirements included in the clause that you do not understand or are contrary to your expectations and needs?
  • Have you checked the words/ phrases that are Defined and understood them?

Exclusions

  • Do any of the Exclusions remove cover required by FSA?
  • Do any of the Exclusions remove cover for any activities necessary to conduct your CoreBusiness?
  • Do any of the Exclusions remove cover for any activities necessary to conduct your non- CoreBusiness?
  • Does any Exclusion appear to exclude activities that could be deemed a usual part of your Insurance broking business?
  • Have you checked the words/ phrases that are Defined and understood them? Do they make a difference to the answers to the questions above?
  • Do any of the Exclusions transfer the Burden of Proof to you? ( The burden of proving an exclusion applies is normally that of the Insurer)
  1. Now read the General Conditions- take note of any obligations imposed upon the Insured.
  2. Now read the Claims Notification Conditions- take note of the obligations of the Insured.
  3. Now answer the Questions below in the order that they appear

Conditions Generally

  • Do you understand the meaning behind each of the Conditions?
  • Have you made a list of the obligations imposed by the Conditions?
  • Is there a written continuing requirement to notify insurers of material information during the period of the policy?
  • Are there any obligation with which you may not be able to comply?
  • Do the Conditions or any of them state or imply that you have made promises to the Insurer?
  • Do the Conditions or any of them appear to give insurers special rights under the insurance contract?
  • Are there any conditions that appear to change the cover from your expectations and needs?

Claims Conditions

  • What are the time limits concerning notification of _

    • a circumstance
    • of a Claim?
  • Are they reasonable and practicable having regard to the operational and reporting controls in your firm?
  • Do you understand exactly what obligations the claims notification conditions impose on you? – Set them out in summary, writing such that tey could be copied to all staff.
  • Are there any Definitions relating to Claims notification clauses? If so do they affect your understanding of what you must do to comply with the conditions?
  • Are any or all of the claims conditions, “Conditions Precedent”?
  • Do you understand the effect of a Condition Precedent?
  • Does your office/business run in a way that can accommodate the obligations of prompt notification and the requirements of the Policy to comply with the Claims conditions?
  1. Now look at the Clauses that describe the Excess and compare this with what is shown in the policy Schedule.
  1. Now answer the Questions below in the order that they appear

Excess and related clauses

  • Do you understand how and where the Excess is defined in the policy?
  • Do you understand how the Excess operates in practice?
  • Does the policy give you permission to notify only those claims or circumstances that exceed a specified sum?
  • Do Insurers pay the Costs and Expenses incurred in defence of the claim (or do these fall within the excess)?
  • If the Excess is “in the Aggregate” do you have a means of monitoring the erosion of the Excess to know when it has been eroded?
  • Do you understand the definition of “eroded”?
  • If the Excess is expressed as, for example, £50,000 in the aggregate, £5,000 each and every claim, £20,000 in all would you understand how this will operate in practise?
  • Do you understand the meaning of an excess including the phrase Each and Every Claim and/or Claimant?

Schedule

  • Does the schedule:-

    • List all of the names of the firm/company that constitute the Insured (including former trading names) ?
    • Show the correct address/es?
    • Show the correct Limit/s of indemnity
    • State whether costs and expenses are included or in addition?
    • Show the correct level of excess?
    • State whether the excess includes or excludes costs and expenses

 Definitions

  • Do any of the Definitions change your understanding of words or phrases in the Insuring Clause/s?
  • Do any of the Definitions change your understanding of words in the exclusion clauses?
  • Do any of the Definitions change your understanding of words in the Conditions clauses?
  • Do any of the Definitions change your understanding of words in the Schedule?
  • Do any of the Definitions relate to the Claims notification clause? If so do they change your understanding of what you must do to comply with the Claims notification clause?
  1. Now read any Endorsements attached to the policy.
  2. Now answer the Questions below in the order that they appear

Endorsements

  • Does the wording of the endorsement make sense? Do you understand what it is saying?
  • Does the Endorsement remove any cover? If so, did you agree to this?
  • Does the Endorsement add any cover? If so did you agree to this and is there any additional premium to be paid?
  • Does the Endorsement impose any extra conditions upon the Insured?
  • Does the Endorsement change or conflict with any of the obligations that you have under the Poicy?
  • Does the Endorsement create any new Warranties?
  • Are any of the time limits changed by the Endorsement?
  • Do any of the Definitions in the Policy change the meaning of the Endorsement.?