General Liability Insurance (CGL)
Please be aware that a general liability insurance which most companies have taken out will not be sufficient for these kinds of claims. The reason hereof is that general liability insurance will cover the liability of the insured towards third parties for property damage and/or bodily injury as well as the consequential damage thereof.
Who are insured?
The insured parties under a professional indemnity insurance (or errors and omissions insurance) are the following:
Company
- Policyholder;
- Subsidiaries (majority share / management control)
- Funds
Natural persons
- Employees
- Directors and Officers (when providing professional services to clients)
As you wil notice the circle of insureds is quite extensive and includes all legal entities of your company as well as the employees who are involved in the rendering of the professional services to your clients.
What is covered ?
The following financial loss components are covered under a professional indemnity insurance:
- Damages that the insured is legally liable to pay;
- Settlements negotiated with the prior consent of the insurer;
- Defence costs.
Additional coverage's:
- (professional) Investigation costs;
- Civil Fines and penalties (as far as insurable by law);
- Emergency costs
- Employee’s protection costs.
The PI insurance does not only cover the actual financial loss which has been suffered by the third party but also defence costs. Even when you are of the opinion that you are not liable towards third party claims you will need to defend you to against these claims. While the invoices submitted by specialist lawyers can add up to significant numbers this part of the coverage is very important.
What is excluded?
The professional indemnity insurance will be subject to certain exclusions such as:
- Conduct exclusion;
- Financial advantage / gaining profit to which the insured is not entitled;
- Intentional criminal acts / deliberately fraudulent act by an insured.
Note: exclusion subject to final adjudication.
- Prior or pending litigation (prior to the inception date / prior to specific date mentioned in policy);
- Property Damage / Bodily Injury;
- Business risks;
- Insured vs Insured (exceptions for employees in capacity as client; recourse by funds);
- Environmental Pollution (defence cost covered due to carve back);
- Mechanical or electrical failures;
- Contractual Liability (except for liability which would also have existed in the absence of such contract).
Policy Extensions
Depending on the scope of coverage a professional indemnity insurance may include the following extensions:
- Extended Reporting Period;
Pre agreed terms on which the period in which claims may be reported to the insurer can be extended (up to 72 months). - Vicarious Liability;
Claims against the insured's for financial loss caused by third parties (service providers) for whom the insured is held vicariously liable. - Lost Documents;
- Estates / Heirs / Legal representatives;
Claims against estates / heirs / legal representatives of the insured person with respect to wrongful acts committed by the insured person.
