Professional Indemnity

Recruitment InsuranceProfessional Indemnity

Welcome

The aim of this presentation is to provide you with a brief overview of professional indemnity insurance covers that are available to recruitment businesses.

Hopefully at the end of this presentation you will have a good understanding of professional indemnity and how they apply to your business.

If you have any questions, please contact me and I will be happy to help you.

Gary ChambersTechnical Director (Recruitment)PIB Insurance BrokersTelephone No. 0117 926 9937Email [email protected]

Professional Indemnity Insurance

As a professional business you receive a fee in exchange for your services as experts in the field of resourcing permanent or temporary staff.

If a third party believes that your company has failed to carry out your duties in a manor that would be normally expected of a professional working in your area of expertise, and they can demonstrate that they have suffered financially because of your negligent act, error or omission, they could bring a claim against your business for the financial loss you have caused them.

A professional indemnity policy will react in the event that a claim is raised against your business, either settling the claim or defend your business in court.

The costs of the award and the legal fees involved in defending you will be covered by your professional indemnity insurer.

Professional Indemnity Claims

I have seen a number of claims over the years under professional indemnity and I believe that the important matter to focus on is not whether or not you feel your business is likely to make a professional error, it is about accepting that we live in a far more litigious world and the cost of defending your business can be very expensive.

Professional indemnity insurance with a reasonable limit of indemnity will be far less expensive than paying for your own legal defence if allegations are raised against your business.

I have seen claims by job seekers that blame the recruiter for not finding them work, I have seen claims for temporary workers where the agency is being blamed for the fact that they were not fit to carry out the duties they were hired for.

Placed contractors that have claimed for their loss of earnings because their contract was cut short by a hirer.

In any business practice, people will raise valid and invalid claims against your activities.

Professional Indemnity Claims

Insurance is about getting protection so you can trade without the constant worry that one court case could wipe out your profits or in some cases force the closure of your business.

It is always important that you notify your insurer of any incident that could give rise to a claim as soon as possible.

Failing to notify insurers and attempting to settle matters could mean that your insurers refuse to react if they feel that their position has been weakened because of actions you have taken.

If in doubt, contact your insurance adviser and discuss any situation with them.

It is always best for your insurer to note a situation and register a possible claim. It shouldn’t have any impact on your premiums unless it is considered to be a serious matter that could involve a large payment by your insurers.

Important Elements of Cover

Limit of IndemnityIt is always recommended that you request quotations for a wide variety of limits, then make a choice based on affordability.

Limits of indemnity available are typically; £100,000, £250,000, £500,000, £1M, £2M, £5M and £10M

Remember, the cost of the legal fees could use up a great deal of your indemnity limit, so I would say that £100,000 is too low for any business.

You might find that the difference between having a £250,000 limit of indemnity and a £1M limit could only cost a few hundred pounds premium per year, so always ask for a range of quotes, then pick the level that you feel reflects your business need.


Limit of Indemnity (continued)

Any One Claim and Aggregate basisYour policy can be on an Any One Claim basis or an Aggregate basis.

On an Any One Claim basis, your insurer will pay out up to your limit of indemnity for each and every claim you have during your period of insurance, with no maximum limit during your period of insurance.

For example, with a limit of indemnity of £250,000, your insurer could pay out on 10 claims during one period of insurance costing them £ 2,500,000.

If your limit of indemnity is £250,000 on an Aggregate basis, then your insurer will pay claims up until the point where the total paid out is £250,000, then the limit would be exhausted and no further cover will be given.


Claims Made BasisTypically on most insurance policies, when a claim occurs it is reported to the insurer that covered you at the time the incident happened.

With professional indemnity, the insurer that is on cover when the matter is reported (made) will cover the claim.

For example; Your business makes an error on 1st March 2015.

A third party finds the error and makes a claim against you on 15th June 2016.

When you receive the claim on the 15th June 2016, you report the claim to the insurer who currently provides you with professional indemnity cover, not the insurer that was covering you back on 1st March 2015 when the error was made.


Claims Made Basis (continued)It is important that you keep continuous insurance cover in force for professional indemnity.

You can switch to different insurers, but you shouldn’t lapse or cancel cover because as soon as your cover ends you will have no insurer to refer claims too. Only the insurer that is on cover on the day the claim is made will accept the claim.

If your business ceases trading, you will need to continue to purchase Run Off cover for professional indemnity for a period of at least 5 years. This ensures that you will have a current insurer if a claims comes for previous work your business carried out before its closure.

Retroactive DateThis date represents the point where the work your business has carried out is covered by your current insurer.

If your retroactive date is 1st November 2015 and a claim is made against you for any work you have done after the 1st

November 2015 will be considered by your insurer. Any work your business has carried out before 1st November 2015 will be excluded by insurers.


Vicarious Liability for Temporary WorkersAs an employer, you can be held vicariously liable for the actions of your employees. In other words, if your employee causes a financial loss to a third party, you could be held responsibility to settle any claims.

Adding vicarious liability to your professional indemnity insurance policy aims to cover you for any financial loss caused through a negligent act, error or omission made by a temporary worker while they are working for the hirer.

There are a few different versions of this cover being offered by insurers, some very restricted.

If you can get insurance that covers you for your legal liability under contract for the negligent acts, errors and omissionsof the temporary worker, this is probably the best level.

Any cover that restricts the vicarious liability so that you are only covered if your business makes the initial error is toorestrictive, especially if you are signing non standard contracts that insist you are responsible for the temporary workers actions.

Thank You

I hope you have found this information useful, but if you have questions or would like your current insurance reviewed, please contact me and I will be happy to help you.

Gary ChambersTechnical Director (Recruitment)PIB Insurance BrokersTelephone No. 0117 926 9937Email [email protected]

Professional Indemnity

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