• In a worst-case scenario, if something went wrong, what would be the financial loss to third parties? |
• What is the potential for bodily injury claims, and even multiple injuries?
• What is the potential for consequential economic loss to any third party?
• What is the potential for multiple claims in any one policy year?
• What is the level of potential legal and investigation costs which may be incurred by a successful claimant or claimants over the life of the claim?
• What is the level of potential defence and investigation costs incurred by or on the insured’s behalf over the life of the claim?
• Is the policy limit inclusive of defence costs or not?
• How long may a claim take to settle? Sometimes this can be eight to ten years or longer, which means the legal costs and interest liability will mount, as will the effect of inflation.
• How many parties are likely to be implicated in any claim or action?
The more parties there are, the more difficult and costlier it is to settle a claim.
• What is the nature, scale, and complexity of work done in the past and during the policy period? (Note: a policy covers exposure from past work where the retroactive date has been extended to do so.)
• What is the overall contract/project value the insured works on? The insured may have a small part and only earn a small amount of fees, but their acts, errors or emissions could delay the entire contract/project.
• How many prior years are there where risk exposure may arise?
In some cases it may take years before a liability becomes apparent to the Insured.
• What is the exposure from ‘incoming principals’ risks at prior corporate entities, or merged or acquired entities?
In general, a sum insured of less than $5 million is unlikely to be adequate for even a small practice which assesses its exposure as low.
A $1 million sum insured is no longer adequate for many Professional Indemnity or
Directors & Officers Liability policies – these days you generally need at least $5 million.
Amanda Smith is an award winning insurance specialist with over 14 years of experience. As the senior principal of Optimum Insurance Services, she provides qualified and tailored insurance broking services to business and corporate markets.
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