Your responsibility in the event of a claim, or you become aware of a circumstance.
Legal protocols apply to professional negligence claims which impose time constraints and procedural rules as to how claims should be dealt with. Insurers will have either in-house specialist claims handlers or will outsource the claims handling to legal firms which provide a claims service. The claims specialist will either work with you directly or may prefer to work through us as you broker in the first instance. When you become aware of a claim, or you recognise a situation which could develop into a claim – what we call a ‘circumstance’ – you must not:
- Make any admission of liability.
- Settle or make an offer of any payment.
- Incur costs without the insurer’s approval.
- If you have received correspondence indicating a claim may be made against you, do not respond other than with a general confirmation of the correspondence letter. Your insurer must sanction all responses.
- Take any action which might prejudice the insurer’s position or their ability to investigate the matter.
- Disclose details of your professional indemnity policy, your insurers or disclose that insurers have been notified to the claimant or other third party.
An insurer will not confirm indemnity immediately after it receives a notification; it will want to investigate the matter to establish that the policyholder has not compromised the policy, so it is essential that there has been no admission of liability or breach of the policy conditions. You must co-operate with insurers and take their lead before sending correspondence or attending meetings with the complainant or their representative. Following notification, it is important you forward to insurers any correspondence you receive – unanswered, and with your proposed response for insurers approval.
What is meant by a circumstance?
There is no single or simple definition, but the following may help. A notifiable circumstance could include:
- A communication from a client or third party, whether this is expressed or implied, of an intention to claim against you or your firm.
- Any criticism or dispute, whether expressed or implied, relating to your performance or of any party for which you are responsible.
- You being aware that someone for whom you have a responsibility, may have failed to meet the standard required and may result in a loss to a third party.
- Any situation where you have to investigate your work to justify your actions.
- You becoming aware that some aspect of your work or services may have fallen short of the standards required and as such, could lead to a claim being made at some time in the future.
- A client withholding or being late with a payment or fee, claims in court to recover fees frequently result in counterclaims.
Who to notify.
Your Professional Indemnity Insurance policy documents will contain a section on how to notify a claim or a circumstance. All notifications should be forwarded in writing and also copied to the ASE claims department. You should not wait more than three days for a confirmation of the notification and if you have not received one, call us. At Professional Indemnity Specialists we are here to help and will advise on all aspects of your notification and will remain actively involved up until the claim is closed or until it makes sense for you to deal directly with your claims representative or appointed solicitor.
When to notify Insurers.
Professional Indemnity is underwritten on what is known as a ‘claims made’ basis. This means that policies will only provide cover against those claims or circumstances that are discovered and notified to the insurers during the period of the insurance. If you fail to notify a circumstance to your insurers at the earliest opportunity, they may refuse indemnity for it when notified at a later date. If you have changed insurers since you should have notified a circumstance and then notify it to your new insurers, they are likely to refer you back to your old insurers who are very unlikely to accept it either.
It is usually condition precedent to insurance coverage being granted that claims and circumstances are notified to insurers under the policy terms and conditions. It would be best if you, therefore, familiarised yourself with your obligations under your policy before a circumstance arises irrespective of:
- The amount involved
- Whether the amount falls within your policy excess.
- Your views or your opinions on your liability or wrongdoing.
- Whether you consider the claim or the circumstance to be spurious or without merit.
- If you consider the claim or circumstance may disappear.
What information do Insurers want?
You must include as many details as possible in your initial notification advice. Insurers may have further questions, but it will save time if the information you provide is as complete as possible. A notification should include:
Complete details of the nature of the claim or circumstance, including names of the complainant or potential claimant.
- Any correspondence which gives rise to your making the notification together with your intended response (not to be sent without insurer’s permission).
- Your own views on the claim or circumstance.
- Details of any allegations that have been made or that you anticipate might be made against you.
- Details of any other parties involved.
- A note of the date you first became aware of the potential claim or the circumstance.
- Your estimation of the quantum which may be involved.
What if someone claims against me after my policy has ended?
In due course, insurers will also require:
- Copies of all correspondence or document including attendance and file
notes relevant to the claim or circumstance.
All Professional Indemnity Insurance Policies are written on a claims-made basis. That means they only cover claims (or circumstances that might result in claims) that are made and notified to us during the period of insurance.
If you retire or sell your business, you could consider a run-off policy. This covers you against any new claims that are made against you after your Professional Indemnity Insurance has expired.
Claims could be made against you many years after an act has taken place, so your run-off policy could cover you for this period. If you already have Professional