Professionals in NZ purchase Professional Indemnity and other Companion Liability Insurance Policies to minimise the financial impact of claims that may be made against them and their businesses.
CLAIMS MADE AND NOTIFIED BASIS
The Professional Indemnity Insurance and Companion Liability Policies currently arranged by LPMS are on a “Claims Made and Notified” basis. What this means is the cover must be in place when a claim is first made against the Member Firm and is notified to the LPMS Insurers, for it to be available.
In addition, the act giving rise to the claim must have taken place after any retroactive date that may be fixed by the Policy. The Professional Indemnity Insurance Policies as arranged by LPMS normally provide “unlimited” retroactivity. This means that, unless a Member Firm has been specifically advised that its retroactivity has been limited by the LPMS Insurers, the date on which the act giving rise to the claim took place does not affect the availability of cover.
If the policy lapses or is discontinued however, its cover ceases completely. The exception is that, any claims or potential claims previously notified to the LPMS Insurers and accepted by them would remain covered in terms of the insurance, even if the policy does lapse.
On the other hand, if a claim arises after the policy has subsequently ceased to be in force, the Member or former Member is not covered, even if the circumstances which lead to the claim took place when the Member had a current policy.
CONTINUITY OF INDEMNITY
It is extremely important therefore, that Members ensure that they have continuous Professional Indemnity cover. Breaking the chain of continuity can have very serious consequences in terms of protection against future claims.
The LPMS Schemes contain a significant additional benefit in relation to continuity of cover. A Continuity of Indemnity Clause is included in the insurance which provides a degree of protection if you should have, but failed to give, the LPMS Insurers notice of “known circumstances” prior to the renewal of your current Policy.
You must have had continuous Membership of LPMS under its insurance arrangements for the benefit to apply. New Members who were previously insured with other Insurers before joining the LPMS scheme should check the availability of cover with respect to future claims arising from any previous work.
Current Members who are thinking of letting their policy lapse, or are looking at alternatives, should carefully consider the following questions:
If I change insurers, will I lose my cover on potential claims that have not yet arisen from my previous work or matters that I may have inadvertently omitted to report to Insurers?
LPMS has been operating since 1976. Will a new insurer still be around in 5, 10, or even 35 years, and if they are not, where will this leave me in terms of claims that may not yet have arisen and been notified to the Insurer?
If I am winding my business down, should I consider obtaining “Run-Off” cover to protect myself and my estate from future claims?
The staff at Aon will be very happy to further discuss any of the above matters with Members. If you are returning to LPMS, having been with another Insurer for a period, then a thorough “Laundry List” exercise should help to bring out any possible circumstances or knowledge of something that should give rise to a claim with these being declared to the insurer.
LPMS members are made up of NZ Quantity Surveyors, Land Surveyors and Valuers, read the top reasons to become a member.