ARP member’s Professional Indemnity and Liability Insurance cover

Professional Indemnity insurance will cover you if a mistake or error is made in providing professional advice or service to a client.

Professional Indemnity insurance is arranged with a Limit of Indemnity. This is the maximum the Insurance Company will pay for a claim. Usually your defense costs are covered in addition. Costs for Pollution and Contamination claims are within the limit of Indemnity. It is not possible to arrange insurance that will guarantee to meet all possible claims but the recommendation would be to arrange cover for no less than £500,000. Contractually you may find you need to arrange a higher indemnity limit.

A Professional Indemnity Policy is a claims made policy. The policy in force at the time a claim is made against you responds to the claim, regardless of the time the event causing the claim took place.

If a Consultant provided advice in 2012 which gave rise to a claim being made today, it is the policy in place today that would deal with the claim rather than the policy of 2012.

As a Professional Indemnity Policy is on a claims made wording, cover for previous work is often called Retroactive Cover.

The policy will have either a retroactive date which means it will cover work performed after the retroactive date or occasionally will have no mention of a retroactive date in which case it would automatically cover all the previous work.

You should make sure that the retroactive date, if specified, covers all work undertaken since the start of your business.

Generally, if you have arranged continuous Professional Indemnity insurance from the start of your business you will have full retroactive cover.

If you are a Sole Trader and retire then you should consider arranging Run Off cover to maintain protection for claims against you after your last Annual Policy has finished.

It is difficult to advise how long cover should be arranged for but you should consider past work and anticipate the time frame for issues to arise. Bear in mind the limitation period for bringing claims in tort is 6 years from the date of the incident.

If you sell your business it is important in the Sale Contract to establish that the purchaser of your business extends their own Professional Indemnity Policy to provide cover for all your previous work.

Employers are responsible for the Health & Safety of employees while they are at work. If an employee suffers an accident at work or becomes ill through their work a claim could be brought against you for compensation. There is a legal requirement if you employ staff to arrange a minimum of £5m of Employers Liability insurance; most policies will automatically provide £10m cover.

If you are a Sole Trader:
No

If you are a Partnership:
No, unless the partnership has Employees

Limited Company:
Yes to include Directors and Employees
If your business is a Limited Company employing the owner where they also own 50% or more of the issued share capital in the company, you do not require the cover.