Professional indemnity – insurance and risk issues from COVID-19

These policies cover a company for acts, errors and omissions arising from advice, design or specification during the course of providing professional services to their clients. Unlike general public and products liability (which is most commonly underwritten on an occurrence basis) professional indemnity is underwritten on a “claims made” basis[1]. See also “professional services firms” under the heading “Industries – Professional Services”.

Across all professionals, underwriting submissions (information attaching to your yearly proposal form or declaration) must be comprehensive. Insurers will not consider risks (new policies or renewals) without adequate information.
Steps to take
  1. Premium relief: professional indemnity is underwritten on a ‘claims made’ basis. Insurers normally use the previous financial year’s fee income to rate premium.

  2. Each profession must continually visit its professional body’s direction on standards and protocols to apply to their practice in the context of COVID-19.

  3. Where necessary, insurance policies need to be reviewed for the following:

    • In the event that your profession requires a physical duty to inspect and your professional body has issued guidance in respect of same for COVID-19, make sure that your professional indemnity policy does not contain a condition for failure to inspect (many do, for instance, valuers, real estate agents, surveyors, certifiers, etc).

    • Does your policy contain a bodily injury exclusion? If so, you should request that this exclusion is “written-back” so it will not apply if such injury arises from “professional services”.

  4. Firms should start to prepare information that will be required for their next renewal, including:

    • details on how your services are affected by COVID-19 and how the Firm has coped with the situation.

    • information as to whether the firm can provide its core services without error or delay? If not, how it is managing this?

    • to what extent can the Firm work remotely? In doing so, how does the Firm continue to ensure the quality and accuracy of the work from its employees?

    • whether there is remote access to the Firm’s core systems?

    • whether the Firm has electronic document management system or is it reliant on paper files?

    • have there been any material changes to your workflows as a result of remote working?

    • is there a central diary system to log business critical dates?

[1] that means they respond to matters first notified during the period of currency. In other words, they cover conduct occurring prior to inception of the policy and will enliven when allegations are first made against the company or its directors and officers.  The retrospective cover may sometimes be subject to a retroactive date.  The date of such will be that in which the insurers agree to cover conduct from.