Topical Issues for Professional Indemnity (PI) and Directors and Officers Insurance (D&O)
This principle interacts with the claims made nature of PI and D&O insurance policies. It determines the extent of coverage available for claims arising during a policy period, but from wrongful acts and circumstances that occurred prior to the policy’s inception or renewal. It is critical to secure correct unlimited retroactive cover.
Does your current policy offer unlimited retroactive cover? Have you reviewed the policy wording and exclusions or has your current broker simply told you have the cover. Our insurance audits have routinely uncovered retroactive coverage which is restrictive.
The ability of an insured person under PI and D&O policies to lodge claims after he or she has left a company is essential to avoid future uninsured losses. After you have left a company, your new company’s policy will not respond to losses that arise from your prior roles.
Once you leave a company you lose the ability to control the nature and quality of its PI and D&O insurance. You must ensure that your current company’s policies contain the required amendments to ensure that you have adequate protection in the future
Duty to Advance Defence Costs
Another common problem with defence coverage contained in some D&O and PI insurance policies is that it does not specify when an insurer must reimburse the insured for defence costs that the insured has incurred. Without clear advancement provisions, individuals may have to wait until the end of the underlying legal action for their insurer to reimburse them for any of the defence costs incurred. This could cause financial hardship for the individual and defies the purpose for which the policy was purchased.
Fraud and Dishonesty
PI and D&O policies contain varying exclusions for fraud, dishonesty criminal conduct, and illegal profiting. These exclusions can often be broad and have a significant impact on determining coverage and the advancement of defence costs. We saw attempted denial of coverage based on such exclusions in the recent High Court cases of vs. CGU and vs. GIO.
You certainly do not want your policies to contain any detrimental exclusions if you are ever facing legal proceedings. One of the reasons that you buy the policy is so that your defence costs are advanced.
How would your current policy respond? Was your policy reviewed and amended in light of the above cases?
If you have any doubts or queries on the above or any other issue concerning your insurance program do not wait until next renewal. Contact Risk Partners now to answer your questions and arrange an Insurance Audit.