Professional Indemnity – FAQs
Manufacturer of the product is: MAPFRE Middlesea
MAPFRE Middlesea p.l.c. (C-5553) is authorised by the Malta Financial Services Authority (MFSA) to carry on both Long Term and General Business under the Insurance Business Act. MAPFRE Middlesea p.l.c. is regulated by the MFSA.
Do I need Professional Indemnity Insurance?
This type of insurance is conceived to meet the needs of those liberal professions which provide special advice, designs or services to clients, susceptible to receive claims regarding their activity. Such professions may comprehend lawyers, notaries, consultants, IT professionals, medical practitioners, electrical and mechanical engineers, architects and civil engineers, accountants, auditors… to name but a few.
In a society where everybody is more demanding and critical than ever, professionals have a great responsibility when providing their services, for there is a lot at stake. Even the best experts receive bad reviews and not everyone will be happy with their services. It does not mean we as professionals do not struggle to give our best: it is only that everybody makes mistakes. And we all know that any mistake may destruct our reputation. It is for this reason that Professional Indemnity insurances are remarkably useful if we are in one of those professional groups, to have the greatest of the protections for us and for our clients.
In fact, many trades and professional associations require insurance coverage in a mandatory way. However, even if we are not obliged by law to have this type of coverage, it could save us a remarkable amount of money in case of a claim, if we have to reward compensations or fees. Thus, our company would be protected from any consequence of errors or omissions committed by us during our professional performance.
What do we have to search in our insurance then? These are the most common problems we may find in our activities:
- Loss or damage as a result of any negligent act;
- Error or omissions whilst carrying out our professional performance;
- Libel and slander;
- Loss or damage to documents;
- Dishonesty of our employees;
- Prior acts (covering claims even before of the inception date of the policy);
- Extended reporting period for expired claims;
- Unintentional breach of confidentiality;
In sum, everybody is exposed to making mistakes. Carelessness, and therefore, negligence lies precisely on not being able to solve our errors. For this reason, Professional Indemnity insurances may be vital depending on our profession.
What is public liability?
Some professional activities, though socially recognized and appreciated, may be problematic sometimes, due to their attachment to technical, scientific, social and ethical norms. This attachment presumes an extent of quality, abilities, and competences in the professional field. Those must meet strict criteria in order to verify the faithful compliance of their duties and establish the degree of their professional responsibility.
There are certain types of responsibility / liability:
- Contractual civil liability: damage or injuries derive from incompletion of the contract.
- Extra-contractual civil liability: it does not derive from a contractual relation, but from the violation of the professional duties.
- Civil liability derived from offence: it derives from the damage or injuries produced by a criminal activity.
Every civil liability is subject to prescription; that is, that after a determined period of time, the actions at stake extinguish. In other words, there are specific terms when we are allowed to claim for an action; beyond those terms, we may not be able to do so, unless there is a law specifying otherwise.
The conditions for the consideration of every liability may change from one country to another. However, most of the European legislation coincides on these requisites to talk about civil liability:
- Illegal action or omission by the professional.
- Negligence or malice by the professional.
- Causality between the action and the resulted damage.
Professional Indemnity insurances are conceived to cover the expenses of the insured arising from an intervention in judiciary procedure. Those professions tending to confront lawsuits due to their social responsibility and risks are eligible for this type of coverage whenever they cause any harm, resulting from their activities.
Some professions are legally obliged to be insured with a Professional Indemnity insurance. If that happens to be the case, there will be typically organizations such as trade associations, which will offer assistance regarding the type of liability more convenient for the work activity. It is for this reason that Professional Indemnity insurances are remarkably useful if we are in one of those professional groups, to have the greatest of the protections for us and for our clients.
What information does my insurer need for my proposal form?
When applying for insurance, it is usual to complete an application form in which we give some information about ourselves, relevant for the insurer. Of course, nobody expects we are experts on insurance policies when we think about buying one, and our insurer should be clear and exact when asking for all the data needed: in the end, they are the ones being the experts. Therefore, it is not about volunteering some information about what we think relevant of ourselves, but rather being accurate and caring with what our insurer requests from us. Honesty in here must be one of our practices: the acceptance of our claim may rely on our trustworthiness.
Proposal forms are face-to-face exchanges of information about us; if done on the phone or online, they are rather known as statement of facts. These forms will be different from the others depending on the type of insurance we are interested in buying. If we have any question about any unclear question along the form, we must inform our insurer in order to respond in the most precise way. It is logical, then, that if we suffer any change in our circumstances related to our type of policy, our insurer must be informed as soon as possible.
The way in which we present our proposal from is crucial for our business to cause a good impression to our insurer. An insurance history about all the changes undergone by our business would be highly recommendable, if it is not already required with the proposal form. Unclear presentations mean an untidy business maybe, so we must be extremely careful with this.
If there is any information that is deliberately kept from the insurer, the insurance company may reject our form, change your policy conditions or charge a more expensive premium. That is why it is infinitely important to check periodically our circumstances and notify any change occurred during the period of the policy. Writing down notes on all the significant changes on your business will make it easier to extend the conditions of your policy when our time for renewal comes.
What is a claims-made policy?
There is a crucial distinction that must be made clear before we intend to hire any policy. Covers for Professional Indemnity usually work on a claims-made¬ way. But what does that mean? It means our insurance coverage will protect us from any claim taking place during our policy period, regardless of the moment in which the damage, malpractice, libel, etc. in question actually occurred. On the contrary, those policies set on losses-occurring basis will only cover those losses resulting during the policy period. This will vary depending on the contract of our insurance, national laws, etc. Therefore, it is essential to read all the conditions of our insurance carefully and in detail, because this can mean such a big difference. For instance, in the construction industry, negligence acts from five years ago may appear now: the insurer will have to protect us from
Once this vital difference is clarified, how do claims work? First of all, if we suspect there may be a claim soon in the future, because we heard some criticism ourselves or any of our employees; this is the reason why communication with our partners or workmates is fundamental to avoid problems. If we know for sure there is something that may have gone wrong, we have to let our insurance company know. How? It depends on the company essentially, but all of them coincide in that it must be as soon as possible once we know about the possibility of the claim.
However, some claims-made policies often integrate a retroactive date in their conditions, so that the covered period goes back only to a certain point in time, and insurers do not have to be responsible for events occurred since the commencement of the business in question. Hence, insurers exclude claims resulting from incidents occurred before the retroactive date if it is thus worded in the policy. In case we do not find the retroactive date is conditioned anywhere along our policy, coverage should go back in time to the establishment of our company. However, it is always advisable to check this type of clauses with our insurer, so that we do not have problems in the future.
What is usually excluded from a Professional Indemnity insurance?
Professional Indemnity insurances are designed to cover every adversity we may confront during our professional activity. However, this does not mean carte blanche and there are some significant exceptions, in which most of the policies coincide, usually not covered by the insurer. These exceptions are usually intended to promote actions and steps to avoid losses, so that you and your insurance company may result in savings (same with retentions).
Limits on the liability may also be susceptible to appear, depending on the general conditions of our policy. Therefore, we must read carefully one by one all the conditions, in order to check the specifications and limitations subject to our policy.
Thus, the main cover exclusions as a rule are usually the following:
- Everything related to other types of insurance (Third-Party liability policies, Employers’ Liability policies, Directors’ Liability policies…).
- Injuries or damages in property resulting from other than an actual failure to maintain the standards required by law of caring in performing our working activity.
- Injuries or damages in property caused outside professional duty.
- Fines and penalties.
- In case of contractual liability (damages or injuries deriving from incompletion of the contract) not caused by negligence.
- Terrorism or warfare.
- Any loss caused by, resulting from, arising out of or related to Pandemic, Epidemic or Coronavirus Diseases
- Claims occurred in the past.
- Acts occurred in the past (there is a specific cover known as Retroactive).
- Any defect on our products regarding manufacturing.
- In case of being imprecise when assessing about the cost of our professional services.
- Every electrical, software, mechanical, or satellite failure outside the insurer’s control.
- Bankruptcy, liquidation, or receivership of our business.
- Radioactive contamination.
- Damages caused by pollution, even in areas where the pollution rates makes it insurable.
Despite of these features excluded, there are still many other that may make our lives much easier. Carrying out our professional activity with peace of mind is essential when our work demands a lot of responsibility. Being covered against problems you may face along your profession is not only a question of comfort; it is also a guarantee towards our clients, our partners and everyone and everything involved in our professional services.