CLIENT QUESTION – DO I KEEP OR CANCEL MY PI & LIABILITY POLICIES NOW THAT I AM NO LONGER CONTRACTING
Client question in Late December 2014
QUESTION: As I mentioned to you earlier, I am now an employee of the company I was consulting to and I have no plans of using my consulting company in the foreseeable future. Therefore, I am considering cancelling the policies I have (liability and professional indemnity). Can you help me with this, please? Or let me know if your consider this to be a bad idea.
KEN’S ANSWER: I cannot comment on whether it is a good idea or a bad idea to cancel. These are your policies and for you to action as you see fit…however:
- Was the contracting work solely for That engagement, or
- Did you use the cover for other contracts with other entities
The nature of the PI Cover is to maintain a current policy during the course that you have an exposure to litigation from the advice you provided. If the advice was solely whilst engaged by the company, it may be prudent to get their agreeance to extend cover for you as a quasi employee so if there is an issue in the future, they will just cover it and not demand from you. On the other hand, if you have been engaged to other companies, you will still have exposure in the market.
Professional indemnity can only be actioned for a claim on a current policy. The date of incident is the date the loss or issue manifests itself to you.
For example:
- You cancel the policies tomorrow
- On Friday you receive notification that someone is holding you responsible for the advice you provided
- In this instance you have no cover
- This is called Claims Made – that is – the date the claim is made on you
The alternative to this is Occurrence Wordings, such as the majority of Liability and Property claims. The date of loss is backdated to the date the incident was first alleged to have occurred.
My aim is to ensure decisions you make on your policies are made with as much transparency as possible. You need to weigh up the pros and cons of cancelling the PI Policy.
It is easy when you sell a car as you no longer own it, so you cancel the cover. When you stop your engaged work, your advice you provided is still be actioned and used by the people you contracted to and if that advice fails them, you are legally responsible, even after the policy is cancelled.
Have a think on this. Please give me a call if you wish to discuss. I can action either way for you, but only after you have understood the potential issues surrounding the decision to cancel.
