We will help you negotiate professional contracts that are fully supported by professional indemnity insurance policies.
This is important because…
- PI insurance covers negligence, in other words, a failure to use reasonable skill and care.
- It also covers breach of contract, but subject to an exclusion of “onerous liability” accepted in contract.
This is market standard, and has been the case for over three decades.
Some brokers will offer “above market standard” policies to cover “onerous liability”. However, there is no guarantee that such cover will be available with each renewal, and the reality is that such additional cover is often temporary.
Therefore, there is a real danger in arranging more PI cover for contractual liability than the PI market standard and then relying on this cover in signing more onerous contracts.
If the cover is no longer in the policy at the time the claim, the issue would then be uninsured.
In our view, arranging and relying on above market standard cover for long term issues contains significant risks
…of increased expense in terms of premium, and over-reliance on a handful of insurers which in turn restricts market choice…
…and ultimately such an approach may prove to be ineffective.
We see a more prudent and cost effective approach to be based on the following:
- The uninsured contractual risk is based on terms which are onerous and above what is expected of a professional at English law.
- There is no moral imperative for the professional to accept the same, and indeed it is fairer for such liability not to be included in their contract in the first place.
- As such the professional’s contract should be renegotiated to remove the exposure.
- In considering the exposure, regard is had to the PI market standard of cover for contractual liability, which is therefore more likely to apply in future when a claim is notified.
Remember: You should not assume that any contract is fully professional indemnity (PI) insurance supported, just because it is a standard document, or in widespread usage.
Check with us!