For businesses or professionals that offer specialist service or advice, professional indemnity insurance is a boon. Also called, errors & omissions insurance, the policy covers claims which are made against such professionals by people who allege that they have incurred losses due to their professional acts. Along with compensating the unhappy client, the errors & omissions insurance policy also covers legal expenses incurred by the policyholder in defending itself in the court.
Purchasing errors and omissions coverage is the first step which professionals and companies can take towards protecting themselves, however, they also need to understand what is required to do if someone files a case against them. Should this happen, the insurer needs to be notified as soon as possible with all the information—how, when and where the wrongful act took place along with the names and addresses of the injured parties. In case you do not approach the insurer within the stipulated time-frame or furnish the necessary information, the insurer can reject your claim.
Though it sounds simple, claiming professional indemnity insurance is a murky subject. Here’s what you should know:
Who can file a legal suit against you?
Anyone. But mostly it will be your clients. It is because they are genuinely not happy with your work, you have made mistakes, or you have not done something which you earlier said that you would do and it’s cost them money, or at least they think so. Also, third-parties can make claims against you for things like copyright issues, defamation, intellectual property theft, etc.
When can you file a claim for your errors & omissions insurance policy?
You can file a claim when someone alleges that you have been negligent in rendering your professional duties or you have not done what you promised to do. Then claims can take many forms. Specifically, you might be accused of breach of contract, defamation, intellectual property theft or negligent misrepresentation. For instance, your client may file a legal suit against you and refused to pay if a project you worked on fails to generate success. Or a competitor might allege that you have copied their website and make a claim against you. In both cases, your errors & omissions insurance company will offer you coverage, irrespective of the fact that whether those allegations are true or not.
How can you find out a potential claim?
A claim form or a snarky letter received from the client or their advocate is generally all the heads up you will require, and it is a strong sign that it is the time to get in touch with your insurance company or corporate insurance advisor.
Remember, not all circumstances are clear and therefore, claims can arise even without any warning signs. Some of the subtle warning signs which you should look upon are increasing tension in the working relationship with your clients, refusal to make a payment, unreasonable criticism, and complaints about work.
When should you notify your broker about the potential claim?
As soon as possible. Not doing so, can have a serious impact on the chances of your claim being settled. Insurers don’t appreciate surprises, and they want to know as soon as you feel that the problem may arise. This way, they can prepare themselves and do their best to avoid spurious claims before they arise. Moreover, late notification is a common reason for claims not being settled. If the insurer thinks that their position has been compromised because you have not got them involved early, they have the right to reject the entire or partial claim.
If you have purchased the insurance policy from a corporate insurance advisor like SecureNow, you can inform the advisor who would contact the insurer and take care of the further process on your behalf.
Points to Consider for Smooth Claim Settlement Process
- Do not admit responsibility or liability
- Do not offer, agree or promise to settle the claim without consenting the insurer
- Do not reply to a written complaint without informing the insurer