Professional Liabilities Back to Basics in Challenging Times

Current Market Turmoil At the beginning of 2020 – and pre-pandemic – we published ‘A Brave New World – Navigating Future Challenges’ which included a whole section on the Market Context and the issues that were unfolding in our engagements with insurers. The subsequent withdrawal of capacity from the PI insurance market in recent periods has led most obviously to increased premium levels, higher excesses and restrictions in cover. However, it has also rendered it less likely that cover can be maintained with the same insurers from one renewal to the next. During ’soft’ market conditions it is possible to renew cover for ten or more annual policy periods with the same provider, fostering a strong commercial relationship with that insurer and reducing the likelihood of claims being rejected for a technical breach of policy conditions. Indeed, it can appear that there are a number of options that appear ‘the same’ when the offer of continuity is there. But when those insurers withdraw from the market that continuity is broken and the ‘claims made’ operation of PI policies is thrown into particular focus. This is a major reason for our Scheme philosophy of fostering long-term continuity with a range (or panel) of insurers. We are not immune from change but always look to have a smooth pathway to manage any change responsibly and with minimum disruption. So, if we are in a period where the market conditions dictate that change is highly likely, what are some of the key factors that a construction consultant (or indeed any professional) should consider? Claims Made Covers Claims made, as a classification tag for PI insurance, is in fact shorthand for ‘claims made and notified in accordance with policy conditions’. PI policies respond only to Claims (as defined) which are both made against the policyholder during the policy period and also notified to the insurers during the same period. If claims are not notified within the correct period then the relevant condition will not have been satisfied and the insurers will be entitled to refuse indemnity.

Claims vs Circumstances The definition of Claim under any PI policy wording usually refers to the instigation or threat of