If you’ve taken the plunge and bought professional indemnity insurance, it’s likely you’ve done it for one simple reason: to protect your business.
So it makes sense you'd want to understand the ins and outs of making professional indemnity insurance claims. Because it'd be a shame to pay for all that protection only to miss out on it if something did actually go wrong.
You'll discover that knowing when to call on your policy is as important as knowing what it covers.
But what constitutes a claim? How do you go about making one? When should you contact your broker or insurer?
It’s worth taking some time to answer these questions for the very simple reason that professional indemnity insurance claims tend to be rather more complicated than claims for, say, a lost laptop.
Right timing for professional indemnity insurance claims
Timing is a big factor. We always advocate getting in touch with your broker or insurer the moment you think something’s not quite right.
This is for two reasons.
First, your insurer is an expert. Getting their claims team involved early can often prevent a sticky situation getting out of control. They’ll know what to do (and what not to do), and when to do it. They’ll also be able to judge if they can settle the matter without rolling out the legal big guns.
Second, if you’ve read your policy wording (you have, haven’t you?) you’ll know you're obliged to notify the insurer promptly in the event of a claim.
Late notification is a common reason for insurers to 'repudiate' (reject) claims. The longer things go on without their involvement, the more their position is prejudiced – and the less they’ll be willing to help. They're well within their rights to take this position, so don’t delay.
That’s all well and good, but how do you know when to get in touch? How do you know the difference between a simple gripe and something more serious? Where do you draw the line?
I definitely have a claim. Or do I?
More often than not, if a client is grumbling about your work, you’ll be looking at a relatively straightforward ‘circumstance that may give rise to a claim’.
Simple mistakes you can fix are often just that and don’t go any further. It’s unlikely a client will hit you with a ‘I’ll see you in court’ letter without giving you the chance to right the wrong first.
However, some won’t be so reasonable and it pays to be cautious. You should call your broker as soon as you’re aware of:
- Any shortcoming in your work that’s likely to lead to a claim against you; especially one that you’re aware of but your client isn’t (yet).
- Any criticism of your work, even if you consider it unjustified. It could still lead to a claim.
- Any threat of a claim against you, even one seemingly made in passing.
- Any persistent complaint about your work.
- Any refusal by a client to pay you for your work. Be wary of clients that delay payments – it could be because they’re not happy with your work.
- Any suspicion you might have that a partner, employee, director or self-employed freelancer may have acted dishonestly (because professional indemnity isn’t just for your mistakes).
Above all, it’s really important that you don’t try and deal with or settle professional indemnity insurance claims on your own – you need the insurer’s approval first. Without their expertise, you risk making things worse.
And unless you’ve already had to tell your client that you’ve got professional indemnity insurance (for contractual reasons), it’s best to keep it under wraps. As soon as a claimant’s solicitor spots the financial might of an insurer, it’s not unusual to find a few more zeros added to a claim.
Usually, we try to avoid using cliches if we can help it. Particularly tired old insurance industry favourites like 'better safe than sorry’.
But on this occasion, we're going to because it's rather apt. Despite what you might think, insurers are happy to help and actually don’t mind paying claims (it makes them look good).
That’s why, if you think you have an issue, a quick call to your broker to talk it through makes sense. You won’t be putting anyone out and, if no further action is needed, there’s no cost or penalty to you.
Better safe than sorry indeed.
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