Last edited 01 Aug 2018

Professional indemnity insurance life cycle

Contents

[edit] Introduction

As a business evolves, its requirements for professional indemnity insurance (PII) are likely to change. PII requirements should therefore be reviewed regularly as a business develops.

[edit] Starting a business

A start-up business will need to consider a policy that covers:

  • Any previous business (if there is a past business that needs to be covered).
  • All of the activities that the business is engaged in.
  • Any actions brought against the business due to breach of statute.
  • Staff actions that may result in a claim.

[edit] A growing business

As a business grows it may be asked to sign collateral warranties. The business must make sure it is covered for all the responsibilities it is being asked to accept. The insurer should be able advise what changes need to be made to an agreement, and where it goes beyond what is covered in the existing policy.

Cyber cover is an increasingly important element of PII and a business should make sure it is covered for matters such as:

  • Accidental breach of GDPR.
  • The costs of notifying aggrieved parties of a breach.
  • Claims arising from a company’s website being hacked.

When a business takes on larger clients it can be asked to hold 12 years cover for a specific project. In this instance, it is very important to keep a good record of projects and to consider how long the business is likely to be trading.

If a business has a reputation for innovative designs it may be worth considering protecting intellectual property. This will help fund, for example, the costs of pursuing an ex-staff member trying to copy a design.

[edit] Selling a business

When a practice is being sold, ideally the buyer will take on all past liabilities, leaving the vendors free of any future claims arising from past work.

[edit] Dissolving a business

When a partnership is dissolved then run off cover needs to be considered. This will cover any claims that emerge in later years. It is usual for all the partners to contribute to this cost.

[edit] Retiring from a business

When a partner retires from a practice that is still trading, usually the insurance will cover the partner’s past work. If the retirement results in the practice ceasing to trade then run off cover of 6-7 years is usually purchased. This is usually renewable annually with the premium reducing by around 12-15% every year. Sometimes it is possible to buy a block multi year policy but this is quite rare.

--Custodian Insurance 12:12, 26 Apr 2018 (BST)

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