Comments Off on EngInsure’s Christmas hours & emergency claims assistance
The EngInsure office will close on Christmas Day, Monday 25 December 2023, Boxing Day, Tuesday 26 December 2023 and New Year Day, Monday 1 January 2024. We will reopen at 8:30am on Tuesday 2 January 2024.
From the EngInsure team, we’d like to wish you and your family a Merry Christmas and Happy New Year!
Emergency claims assistance
For any property claim emergencies during this time, it is recommended you contact your insurer directly.
Comments Off on A Guide to ‘Named Insured’ and ‘Interested Party’ for Engineers
Insurance contracts play a pivotal role in the risk management strategies of businesses, and engineering firms are no exception. It is critical for business owners to comprehend the nuances of such contracts, particularly the terms ‘Named Insured’ and ‘Interested Party’. This article aims to elucidate these concepts in a clear and comprehensive manner.
To explain using an analogy, think of an insurance contract like an engineering blueprint. The ‘Named Insured’ is like the primary builder who uses the blueprint directly to construct a building (and claim benefits). The ‘Interested Party’ is like a neighbouring property owner. They don’t build from the blueprint, but they care that the structure is sound because it impacts their adjacent property. They have a stake, but no direct hand in the construction.
The Concept of a ‘Named Insured’
The term ‘Named Insured’ refers to an entity explicitly named in the insurance contract who is not the primary contracting party or insured. This entity is endowed with the right to enforce the policy directly against the insurer and lodge claims. However, it is important to note that the ‘Named Insured’s conduct, such as non-disclosure of pertinent information, can influence the admissibility and payout of a claim.
Understanding an ‘Interested Party’
An ‘Interested Party’ signifies an entity with a direct or indirect financial interest in the subject matter of the insurance contract. While not a party to the contract, they may be designated as a third-party beneficiary (TPB), provided they are specifically identified in the contract. As a TPB, they are entitled to recover from the insurer any losses they incur in accordance with the terms of the contract. Again, the conduct of the contracting party can affect the validity and payment of a claim.
For instance, an ‘Interested Party’ in a hire agreement could be a venue owner who may be covered under the event organizer’s public liability insurance for any potential property damage or personal injury incurred during an event.
Insurers and the ‘Interested Party’
In the context of a Professional Indemnity (PI) policy, ‘Interested Parties’ are not noted as they are under a Public Liability policy. If an ‘Interested Party’ is noted under a PI policy, they are considered an ‘Insured’ under the policy. This differentiation is vital due to the ‘Related Parties’ exclusion clause present in all PI policies, which precludes the policy from responding when one insured party lodges a claim against another insured party. Thus, ‘Insured’ parties should provide interested parties with a certificate of their Professional Indemnity policy to validate its existence.
Examples of ‘Interested Parties’
Here are some common scenarios where ‘Interested Parties’ may be involved:
Landlords: In property insurance policies, landlords may be deemed ‘Interested Parties’, given their financial interest in the payout following property damage.
Financiers: If the insured property serves as loan collateral, financiers would be considered ‘Interested Parties’, as they have an interest in the insurance payout following property damage or loss.
Principals: Principals, or business owners, are often ‘Interested Parties’ in professional indemnity or third-party liability covers due to their interest in shielding themselves from third-party lawsuits that might induce financial loss.
Please note that these are generalized scenarios, and the specific cover for each ‘Interested Party’ is determined by the terms and conditions of your insurance policy.
Understanding the intricacies of these terms is essential for effectively navigating insurance contracts and making informed decisions that safeguard your business. If you would like personalised advice regarding your specific circumstances, feel free to reach out to one of the professionals at EngInsure.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Solving the Insurance Challenge for Engineering Businesses
Engineering firms play an integral role in designing, building, and maintaining critical infrastructure, from power plants and bridges to complex computer networks and spacecraft. However, these companies face numerous risks in their daily operations, and one of the most significant challenges they encounter is obtaining adequate insurance coverage. This article delves into the complexities surrounding insurance coverage for complex engineering businesses, examining why it is often challenging to acquire and what can be done to address this issue.
The primary obstacle for engineering businesses is the potential high-risk nature of their work. Companies that design and construct offshore oil rigs, for instance, are exposed to numerous hazards, such as explosions, fires, and environmental accidents. Similarly, engineering firms that develop and test medical devices face potential legal liabilities, product recalls, and intellectual property disputes.
Due to the substantial risks involved, insurance companies approach providing engineering Professional Indemnity coverage with a high level of caution. The insurance industry is highly regulated, and underwriters must adhere to strict guidelines when assessing the risk of potential policyholders. In the case of engineering businesses, underwriters face several challenges:
High levels of complexity: Engineering businesses often operate in complex environments, which can make it difficult for underwriters to understand the full scope of the risks involved. For example, a company that designs and builds a new type of jet engine will face numerous potential hazards, from material failures to design flaws.
High levels of customization: Engineering firms frequently work on highly customized projects, which can vary greatly from one project to the next. This customization can make it difficult for underwriters to assess the risks involved, as they may not have experience with the specific type of project in question.
Cost: Insurance coverage for engineering firms can be costly due to the heightened risks involved. The premium required to adequately price the risk exposure can make it challenging for smaller or start-up Companies to obtain coverage or the coverage limit they need to operate effectively.
So, what can engineer businesses do to address this problem?
There are several steps firms can take to make themselves more appealing to insurance underwriters:
Establish a strong safety culture: The most effective way to reduce the risk of accidents and incidents is to establish a robust safety culture within the organization. By prioritizing safety, companies can reduce the likelihood of incidents occurring, which can make them more attractive to insurance underwriters.
Develop a comprehensive risk management plan: Engineering firms should create a comprehensive risk management plan that identifies potential hazards and outlines procedures for mitigating them. This should also include contract management. By taking a proactive approach to risk management, companies can demonstrate to underwriters that they are taking steps to minimize the risk of incidents occurring.
Maintain accurate records: To help underwriters accurately assess the risks involved, engineering firms should maintain accurate records of their past performance. By documenting incidents, accidents, and other relevant information, companies can provide underwriters with a more complete picture of their risk profile.
Work with a specialist insurance broker: Engineering firms should collaborate with a specialist insurance broker who understands the unique risks involved in their industry. These brokers can help firms navigate the insurance market and identify the coverage options that best meet their needs.
In conclusion, securing adequate insurance coverage can be a significant challenge for complex engineering businesses. However, by adopting a proactive approach to risk management, maintaining accurate records, and working with a specialist insurance broker such as EngInsure may make the process more streamlined and effective.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Revisiting your professional indemnity insurance policy?
Keep these points in mind…
Many underwriters who exited the market during the pandemic are now re-entering, and with premiums having stabilised, it’s likely that underwriters will need to find alternative ways of enticing customers in order to remain competitive. This could mean they offer lower prices, increase the amount of coverage, or provide different clauses.
It’s prudent for purchasers to revisit cover as there might be an opportunity for EngInsure to find a more competitive option for your business.
EngInsure can assist you when revisiting your insurance policy, here’s a breakdown of some key points that engineers need to be across when revisiting their policy.
1. Why is it important for engineers to regularly revisit their policy?
Regularly reviewing your policy is an essential part of managing your insurance cover. It can provide the confirmation that you’re on a cost-effective policy that’s well-suited to your professional needs, or it could signal other options in the market that offer a more competitive price point or better coverage.
2. How often should engineers revisit their policy?
As a rule of thumb, revisit your policy at least once a year. This aligns with most insurance policies that need to be reviewed or updated on an annual basis.
However, when there’s been a major change in your business, it’s critical to revisit your policy more regularly and consider how the change will affect your cover and renewal rate. Major business changes could include factors such as the number of projects being undertaken as well as the cost involved or working on projects of a different nature. For example, if an engineer previously involved in plug and play work has recently started to take on higher-risk designs, it’s essential to declare this change to your broker. They can check if your current policy covers the new type of work.
As well as considering any major business changes that have already occurred, you should also look ahead to anticipate business movements that could impact your cover.
There’s also value in revisiting your policy during a quieter period. You’re more likely to get quotes and quicker responses from underwriters than during a frantic period when there’s a rush of people looking for quotes at the same time.
3. What steps should engineers take to determine which policy is best suited to their needs?
It’s always best to seek professional advice. Your first port of call should be a broker – ideally one with experience dealing with insurance in the engineering sector such as EngInsure. Depending on the nature of your insurance policy, it might be relevant to seek legal advice.
It’s also important to evaluate the terms of each policy. Discuss the specific clauses with your broker and the level of coverage each policy provides. This should include checking for factors such as:
· Liability limits: Is the amount of cover provided under your policy adequate to protect your business?
· Excess: How much excess do you need to pay before your coverage kicks in?
· Cancellation clause: Some policies include a clause for policy termination, which means your policy could be terminated and a premium refunded on a pro-rata basis. One way of ensuring you maintain some coverage after the cancellation date is to have a run-off cover period included in your contract.
· Bodily injury and property damages: It’s not uncommon for these to be excluded from a PI policy, so if you want to be covered for this kind of damage, you may need to have a specific clause added.
· Retroactive date: How far back in time can a loss have occurred in order for you to be covered by your policy?
· Territorial and jurisdictional limits: If your company provides products and services to or in other countries, make sure your policy covers this.
4.What are the benefits of using a broker?
Having a strong working relationship with your broker means they’re better-positioned to find policies that meet your professional needs.
A broker can answer any questions you have about your insurance – for example, if you want to know whether a major change in your business is covered by your policy, or whether you can change some elements of your coverage.
A broker can also help scope out any new opportunities in the market.
5. What information should I disclose to my broker?
It’s best to disclose as much information as possible. The more that’s declared, the easier it is for a broker to define the scope of your company’s work. This can help the broker to determine the type of policy that’s best suited to your professional needs.
When disclosing information to your broker, make sure to declare your company’s past, current and future professional activities. Even if your company is no longer performing a particular activity, you should declare this information since professional indemnity claims can arise years after the work was performed.
All information should be provided to your broker at approximately 6 weeks before your policy is up for renewal. Keeping good records throughout the year and approaching your broker early will help to make the process of revisiting your cover a smooth and seamless one.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Discover how risk management considerations can help you better approach future contracts.
While there are no guarantees, implementing strong risk management measures when drafting contract with clients can help engineers achieve more favourable insurance outcomes.
The cost of insurance is dependent on a lot of factors, from the insurance market and your claims history to the size and scope of your projects, so there is no simple way to go about reducing premiums. That being said, there is a way to put yourself in the best position possible – keep insurance front of mind when drafting contracts.
The more risk management measures you have in place when entering into contracts with clients, the more you can limit claims and show insurers you are serious about minimising claims and reducing business risk.
What follows are four questions that can help engineers approach future contracts.
1. Do you use standard terms and conditions with every contract?
To understand how contracts affect insurance, it’s always helpful to take the perspective of the insurer.
Imagine two clients. The first is an engineering firm that wants to maximise their revenue, and so always uses the same insurance and liability clauses to save time and money. The second is a firm that pays attention to the unique aspects of each new project and makes sure the contract’s terms and conditions are fit for purpose.
For the insurer, it’s clear that the second firm is doing more to reduce its risk of a claim. Every contract contains unique exposure, so they should all be treated on a case by case basis. A smaller project with no subcontractors will have different requirements from a large construction project with multiple subcontractors, for example.
Ideally, you should always have professional legal counsel review all contracts and amendments wherever possible.
2. Do you always enter into a written contract with your clients?
While it’s true that binding contracts can be made orally – even with just a few words and a handshake – you should always have a written contract that outlines the responsibilities and expectations of all parties. This is true even if you’re undertaking a quick project or an additional, unforeseen component to an existing project.
Who is responsible for what part of the project? What activities are and aren’t covered? What level of insurance must each party have?
These questions and more are why written contracts are a must.
Should a claim be made, the lack of a written contract introduces greater complexity to proceedings, which usually results in higher legal costs. In court, the terms of written contracts have frequently been the cause of extended debate, where both sides argue about the exact meaning of certain phrases. Given this, just imagine the difficulty of settling disputes regarding oral contracts.
3. Do you limit your liability under contract either by scope of activities or dollar value?
If a contract doesn’t contain clauses that address and limit liability, the liability of all parties is technically unlimited. So it’s no wonder insurers favour contracts that appropriately limit and exclude liability.
There are a few ways liability limitations are placed into contracts, these include:
Outlining what parties are responsible for which activities, and the extent to which they can be held liable for something going wrong
Specifying time frames within which a claim can be made
Capping the dollar value of potential claims
Liability caps can be applied both on a per claim and aggregate basis. The latter sets a total dollar value to liability, and is often wise as it gives insurers more certainty.
While clauses that limit liability are important, unfair contract laws mean you can’t simply draft a contract that avoids all your responsibilities. In general, clauses can’t cause a significant imbalance between the parties and they should be reasonably necessary to protect legitimate interests.
Again, professional legal advice should be sought to ensure your contract is fit for purpose.
4. Do you always exclude liability for consequential losses in your contracts?
In broad terms, a consequential loss (also called an indirect loss) is a secondhand effect. It’s a further loss that occurs after, and because of, a direct loss. There are various types of consequential losses, including loss of profit, loss of future contracts and losses caused by business interruptions.
To help you understand the difference, imagine an engineering firm that undertakes a project. This project has a production delay (from a machine breakdown, for example). The production delay is identified, examined, and fixed. Due to the delay, there is a business interruption that leads to loss of income and the customer deciding to no longer do business with the firm.
In this hypothetical, the cost of identifying and fixing the problem is a direct loss. The loss of income is also a direct costs, if the costs of delays are referenced in the original contract.
On the other hand, the loss of a customer is a consequential loss, because while it’s intimately tied to the project’s original problem, it’s an indirect result.
When looking to exclude consequential losses from a contract, it’s best practice to separately identify all types of losses you could experience, as the failure to do so can potentially leave the contract open to dispute.
Consequential losses can increase the exposure you have on any given project. That’s why it’s generally a good idea to exclude liability for them when drafting contracts. You will tend to get better insurance outcomes when it’s clear that you aren’t liable for unforeseen aftereffects.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Insurance claims against Australian engineers continue to rise
Engineers assess risks for a living, but the cost of failing to adequately protect your practice presents unexpected problems.
Imagine you’re a self-employed civil engineer awarded a tender by a local construction firm to conduct a topographical survey and detailed design to upgrade a private road. Not only is it a fantastic project in your community, but it gives you the opportunity to build a strong working relationship with a leading local business.
It’s a relatively straightforward project in an area you know well, and with 20 years of practice behind you, not the kind of work you feel you need to bother to insure. The job goes as planned, and you move on to your next project. Then you receive a letter in the mail.
There were discrepancies encountered on site between your survey model and another surveyor’s plans at the start of construction — and it’s going to cause significant delays and increase project costs. The construction firm wants you to cover the discrepancies.
You discover that they changed the specifications after your design was completed, accounting for the differences in the models. Nevertheless, they already have their lawyers and insurers involved — and even though you are not at fault, you need to retain your own lawyer to work through the legal and procedural nightmare, with fees running into the tens of thousands of dollars.
Unfortunately, this kind of scenario is becoming all too common for Australian engineers. Professional disagreements are part of the job, but increasingly, they’re turning into costly legal disputes.
The data is in
Australia is seeing an explosion in professional indemnity claims against engineers.
Arecent report by University of Melbourne researchers found that the residential construction boom in Australia’s major cities since 2008 has seen a “corresponding increase in noncompliant work that has led to significant latent defect cases and protracted disputes”.
Not only has there been a rise in the quantity and severity of professional insurance claims, but we are seeing increased regulatory scrutiny, meaning that even highly experienced and less risk-averse engineers need to consider their liability.
State government and regulators are also reviewing indemnity insurance in the sector. In New South Wales, new regulations came into effect on 1 July 2021 to ensure that those who control design and construction risks, such as engineers, are held responsible for their work (with mandatory insurance required from 1 July 2022).
Law firm Clyde & Co warned that, in Queensland, “the engineering industry should be prepared for a number of compliance audits and investigations into non-compliance with the Professional Engineers Act 2002 (Qld) to be conducted”.
While there is a particular focus on construction due to the cladding crisis, the legislation is broad and covers structural, civil, mechanical, geotechnical, fire safety and electrical engineering.
Engineers are also finding themselves as collateral damage in projects where they only played a small part. Claims recently brought in Australian tribunals include an engineer sued by neighbouring property owners in a dispute over damage arising from construction work, and an engineer added as a defendant in a claim where they were not directly liable, meaning they were required to obtain legal advice to rectify their position.
In these kinds of circumstances, professional indemnity insurance offers protection from legal expenses that can amount to hundreds of thousands of dollars.
Risk management
A common misconception in the industry is that small operators will be covered under a project, or they simply will not be exposed to liability claims.
As we’ve seen, this is far from the case. Claims can arise over a range of issues, including allegations of professional negligence — whether founded or not — project management issues, and design and certification disputes.
Without professional indemnity insurance, you are personally liable for any claims of breaches of duty of care, and the legal costs associated with any disputes. In many places, not having insurance also means that you are in breach of government regulations, putting your entire practice at risk.
Expert advice
While insurance claims are rising, many professionals are finding it difficult to obtain professional indemnity cover. Some providers are skirting around the market by providing cover that excludes critical items such as cladding.
Over the past few years, a number of insurers have exited the professional indemnity market due to the increase in claims, meaning that engineers may be offered cover that fails to meet legal requirements, posing licencing issues and potentially opening up the engineer to legal claims.
Just as professionals wouldn’t engage an electrical engineer to design a suspension bridge, insurance is also a specialised field. EngInsure, an affiliate of Engineers Australia, is an engineering insurance specialist with the expertise to help engineers navigate the complex requirements.
EngInsure has access to indemnity markets not available to the public, as well as existing relationships with a range of insurers who specialise in specific engineering business activities.
No matter the type of job, or how many years you’ve been practicing, operating uninsured in today’s market is simply not worth the risk.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Free webinar: How engineers can navigate the PI Insurance storm.
Engineers across many disciplines are grappling with skyrocketing Professional Indemnity (PI) Insurance premiums and unprecedented market conditions. The challenge of securing suitable PI Insurance cover only continues to grow.
With PI Insurance being a legal or contractual requirement for many engineers, market conditions persist to pose a major issue for many practices. Watch our free webinar recording and hear from a leading PI Insurer and engineering legal specialist, who will help you better understand how to combat this PI Insurance storm.
View our free webinar:
The webinar covers:
The state of the PI Insurance market in Australia, plus what’s in store for the future?
PI issues in the construction industry – cladding, building certification, and regulatory changes
The importance of holding adequate PI Insurance to protect yourself
An overview of the claims process, and potential legal costs of a PI Insurance claim
Key Takeaways:
Why due diligence is imperative in your engineering practice when it comes to insurance and risk
Strategies to help attain adequate insurance outcomes
What engineers can do to prepare for a claim in a dispute
Guest speakers:
Michael Giansiracusa CEO | Whitbread Insurance Brokers
We’d love your feedback on the webinar. Please click here to fill out our questionnaire.
What can you do to achieve the best possible result for your coverage in this situation?
A specialist PI Insurance broker can provide valuable assistance to achieve the best available insurance outcome for your engineering business.
An EngInsure insurance broker has access to a variety of markets not available to the general public, and our economies of scale aid us in negotiating the best available policy conditions for your business.
With extensive experience, our professional indemnity specialists have the knowledge and expertise to fulfil your risk protection requirements, compiling bespoke insurance solutions that align with your risk profile.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Is it common for Professional Indemnity Insurance coverage to be changed by the insurer without notice?
Under the current insurance market conditions, it is becoming increasingly common for engineers to find their Professional Indemnity (PI) Insurance cover has altered in some way at renewal. These may come in the form of reduced limits of cover, increased excesses, coverage exclusions or special conditions of cover.
Below we explain the reasons behind this, and some things you can do to assist in achieving the best available insurance coverage for your business.
What coverage changes are engineers encountering when receiving renewal documentation from their PI Insurer?
It is becoming increasingly common to see the following PI coverage changes at renewal:
Reduced PI Insurance Sums Insured e.g. an insurer may only offer cover up to a certain amount. If higher sums insured are needed, a co-insurer arrangement may need to be explored, where two different insurance companies share the risk.
Cover exclusions e.g. building cladding coverage exclusions, refusal to cover certain business activities under the policy.
Excess (deductible) increases in respect of Claims.
Special coverage conditions e.g. certain risk management measures must be implemented before coverage will be offered.
Renewal invitation not offered – this is worst case scenario, where the insurer cannot offer renewal for the policy. This may be for a variety of reasons e.g. poor claims history, the insurer has changed their risk appetite, the insurer has reduced financial capacity, the engineer has added new higher risk business activities that sit outside the insurers risk appetite.
At present coverage changes are also often accompanied by renewal premium increases. In general, we are witnessing the following:
A 20% increase in premium in the absence of any changes to the insured risk.
For high risk occupations, substantial rate increases of over 50%. In particular this applies to design and construction, which has unfortunately seen a sustained history of large claims.
How is the insurance market affecting PI coverage changes?
Australian and overseas insurance markets are experiencing hard market conditions.
What does this mean?
Over a sustained period, insurance companies have been experiencing high loss ratios, where claim payments to clients exceed the premiums collected. Under pressure to recoup their financial losses, and to ensure ongoing sustainability in order to continue to pay claims, insurers must increase premiums and apply tighter policy conditions e.g. higher excesses, more cover exclusions, and restrictions on the risks they are willing to cover.
We are witnessing these conditions across the majority of insurance policies, with some more affected than others. When it comes to PI Insurance, the hard market has predominantly affected engineers classified by insurers as at a ‘higher risk’ of suffering claims. However this trend is now also affecting all risk categories.
What is causing the hard market?
Claims are occurring at greater frequency and a greater cost to the insurer. This can mainly be attributed to the trend of social inflation where litigation is occurring more often, and decisions are weighted towards plaintiffs, with higher compensation payments.
A low interest rate environment which makes it difficult for insurers to achieve strong investment returns to offset poor claims loss ratios.
The COVID-19 pandemic, which has served to complicate the insurance market further to the above, with insurers becoming more risk averse and selective in what they choose to cover, avoiding unnecessary financial exposures in fragile economies.
Why do changes to cover occur?
Each year at renewal, your PI Insurance policy is reviewed / re-underwritten and is subject to change by the insurer. Insurance companies are entitled to make policy changes for a whole host of reasons. They may change policy conditions, increase premiums and deductibles, and they are in no way obligated to invite renewal each year. What happens to your coverage is at the insurer’s discretion.
Policy changes may occur without notices for some of the following reasons:
A change in your risk / business activities
An element of your business activities may have changed over the course of the year, e.g. a new service offered to clients, or you may have entered into larger contracts with different limits of liability.
When this occurs, the insurer will reassess your risk and may change your policy coverage according to the changes in risk in your business. I.e. if you represent a greater risk of claim occurring, or claims are likely to be larger in cost, the insurer may increase deductibles, or limit your sums insured below what you require for your new level of exposure.
An insurer has changed the underwriting guidelines or ‘risk appetites’ they must adhere to
Underwriting guidelines are a set of rules and requirements an insurer sets out, which guides decisions on what risks they can accept to insure, the excesses applicable, and what policy conditions can be offered.
These guidelines, or changes to the guidelines, are what can cause changes in your renewal premium, cover conditions, excesses and whether or not you will be offered insurance at renewal.
Changes in risk appetites are exacerbated at present by the hard insurance market conditions.
Your claims history
If your engineering business has an outstanding claim, an extensive claims history, or claim notifications, there is a chance your conditions of coverage may become stricter e.g. an insurer may require specific risk management measures to be implemented by your business before they will agree to offer coverage.
This is done to help the insurer manage the likelihood of claims occurring, which can impact their financial viability and capability to pay claims.
Industry claims trends
Insurers may experience a large number of PI claims for a certain engineering discipline. This can negatively impact their claims ratio by reducing the premium pool, due to a high number of claims being paid, and subsequently, the financial viability of offering insurance to businesses within this engineering discipline.
Based on claims trends, insurers may impose certain cover exclusions for policy sections that record a high number of claims, or cap the total sums insured they will offer. This helps ensure the insurer can afford to pay insurance claims without making a loss on their balance sheet.
Market withdrawal as a result of poor financial performance
PI insurers can withdraw from markets where the provision of insurance is not financially viable. Should this happen, an insurer would decline cover at renewal.
Generally this occurs in markets where claims ratios far exceed the premium pool available, insurers are making a financial loss, and cannot continue to pay claims. Due to the increased frequency and cost of PI Insurance claims this is becoming a real problem.
What can you do to achieve the best possible result for your coverage in this situation?
A specialist PI Insurance broker can provide valuable assistance to achieve the best available insurance outcome for your engineering business.
An EngInsure insurance broker has access to a variety of markets not available to the general public, and our economies of scale aid us in negotiating the best available policy conditions for your business.
With extensive experience, our professional indemnity specialists have the knowledge and expertise to fulfil your risk protection requirements, compiling bespoke insurance solutions that align with your risk profile.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on The question isn’t “do you have Cyber Insurance?”… It’s “what are you doing without it?”
Cyber-attacks are ranked as one of the top three business risks globally for 2021 (Allianz Risk Barometer, 2021).
Engineering businesses rely on technology more than ever before, and the global pandemic has only served to heighten this dependency. It is this reliance on tech which has seen cyber-attacks become a highly lucrative crime, and drive cyber criminals to become increasingly sophisticated in their methods of attack.
It does not matter how ‘secure’ you think your IT systems are, all businesses of all sizes are vulnerable to attack.
Protect your engineering business from serious financial losses by ensuring you have Cyber Insurance in place.
The current cyber risk landscape
Recent reports illustrate just how severe the current threat of cybercrime is to businesses.
Key trends:
The pandemic has caused an even greater push towards digitalisation and remote working, generating colossal tech vulnerabilities, and even more opportunities for system intrusions (AGCS).
Cyber criminals are using increasingly creative hacking techniques e.g. automated scanning to find security gaps, attacks on poorly secured routers, and ‘deepfakes’ – where realistic images or videos of individuals are modified or falsified by artificial intelligence to commit fraudulent activity.
Ransomware incidents are increasing in severity and sophistication, with hefty extortion demands (Cyber Risk Trends Report, AGCS).
Privacy regulations and fines and penalties for data breaches continue to increase.
Cyber-attacks are no longer isolated to companies with vast amounts of sensitive data. Cyber criminals are progressively targeting traditional industries through ransomware attacks and business email compromise scams, where invoices are unknowingly paid into fraudulent bank accounts.
The facts:
When Coronavirus first peaked in April 2020, the FBI reported a 300% increase in cyber incidents.
Cyber-crime is now estimated to cost the global economy over $1 trillion, up from 50% just two years ago (Mcafee).
Despite these alarming figures, 56% of surveyed companies confessed they do not have a plan to prevent and respond to a cyber incident…(AGCS).
What can happen to your business in an attack? What do you stand to lose?
Cyber-attacks can come in a variety of forms. Ransomware, phishing attacks, malware and business email compromise (funds transfer fraud) are among the most common, and all of these can have a serious impact on your business and bottom line, not to mention the personal emotional toll.
The impact of a cyber-attack:
Business interruption Without access to integral IT systems, businesses can be completely paralysed, unable to trade without their key systems (e.g. emails, zoom, client records, files, payment systems, operating systems etc.). This downtime can have a serious financial impact.
Direct financial losses Cyber-attacks often result in major financial losses. Companies may have no choice but to pay large ransoms in order to regain access to their data, and business email attacks may result in large sums of money being inadvertently paid into fraudulent bank accounts – the list goes on.
Forensic investigation costs Specialist consultants are often required to discover the origins in order to try recover data or pursue the criminals. This expense can amount to tens of thousands of dollars.
Incident response costs IT consultants and forensic IT specialists often need to be engaged to assist in IT infrastructure and data recovery, as well as restoration costs. They also investigate the origins of the attack. This expense can reach into the tens of thousands of dollars.
Third party compensation payments Should any clients or business partners be adversely affected by a cyber-attack, legal proceedings can ensue, and businesses can be ordered to pay substantial claims for damages. Legal expenses and compensation claims can amount to thousands of dollars.
Statutory fines and penalties Australia has mandatory data breach notification laws, making it compulsory to report a privacy breach to the Office of the Australian Information Commissioner. Breaches of this legislation can result in fines of up to $360,000 for individuals and $2.1 million for businesses.
Reputational damage If your clients or the news media get wind of an attack, it can be highly damaging for your brand. It may lead to a lack of trust or confidence in your brand, and result in current or potential clients going elsewhere. It can also see the need for PR specialists to mitigate damages where possible.
Did you know? Cyber-attacks are NOT covered by a standard business insurance policy. You are not protected against these losses if you do not have Cyber Insurance.
Cyber Insurance claim example
The following claim example illustrates just how expensive a cyber-attack can be…and the value of insurance.
Cyber incident: Business email compromise claim
Background Hackers gained unauthorised access to the email account of a director of an engineering business. This was achieved by harnessing account credentials available on the dark web.
Once the hacker infiltrated the email system, they began using the company director’s account to email clients with outstanding invoices, advising that all future invoice payments should be made to a new bank account. To make this request appear legitimate, the hacker created fake invoices visually identical to those of the engineering firm, with altered bank account information.
Multiple clients of the engineering firm went on to pay their invoices into the fraudulent bank account. These payments amounted to a sum of $56,000 by the time the business owner discovered something was wrong.
Outcome The engineer claimed the business’ losses against their Cyber Insurance policy. Their policy covered the direct financial loss suffered as a result of the hacking, and fraudulent invoice payments. It also covered the forensic investigation costs associated with the incident, and the cost to re-secure the engineering firm’s IT systems.
Claim payment: $80,000
Many businesses struggle to get back to where they were before an attack, but sadly, some never recover, and are forced to close their doors.
Make Cyber Insurance part of your risk management plan.
Cyber Insurance plays an integral role in minimising the collateral damage of a cyber-attack.
Following a cyber incident, your insurer and all specialists engaged will lead a coordinated cyber incident response, helping establish a sense of calm, and a methodical way forward in what is a highly stressful, fast evolving situation. Cyber Insurance can ensure the best outcome is achieved for your engineering business.
Cyber Insurance is designed to cover:
First party costs (costs to your business)
Incident response costs – cover for costs involved in responding to a cyber incident in real time. This includes IT security and specialist forensic support, legal advice in relation to breaches of data security, PR specialists to mitigate brand damage, and the cost associated with notifying any individuals e.g. clients or suppliers who have had their data stolen.
Cyber extortion – cover for costs incurred to respond to fraudsters attempting to extort money from you by threatening to carry out a cyber-attack or by threatening to expose or destroy data after compromising your network. E.g. ransomware payments, or social engineering (otherwise known as CEO fraud or business email compromise), where attackers pretend to be a business owner or figure of authority, and trick a client or employee into sending funds to a fraudulent bank account.
System damage – cover for the repair and restoration or your data and applications in the event your computer systems are damaged as a result of a cyber incident. This is critical cover to get you back up and running.
System business interruption – cover to reimburse loss of profits and increased costs of working as a result of interruption to your business’ operations caused by a cyber event.
Note: Traditional business interruption insurance does not cover you for cyber incidents.
Third party costs
Network security and privacy liability – protection against third party claims for compensation arising out of a cyber event, e.g. transmission of harmful malware to a third party’s systems or failing to prevent an individual’s data from being breached. This includes cover for legal defence costs, and any damages ordered payable.
Regulatory fines – cover for the cost of certain statutory fines and penalties imposed on an organisation as a result of a data breach.
Media liability – cover for third party claims arising out of defamation or infringement of intellectual property rights.
Risk management measures are key to cyber-attack prevention
In addition to Cyber Insurance, the Australian Government has some excellent risk management and prevention resources to help you:
Reduce the likelihood of an attack
Minimise the severity of a cyber attack
Set yourself up for a faster recovery to get your business back on track
EngInsure are here to support you with important insurance advice and solutions to protect your engineering business. Contact our team of specialists to ask about a tailored Cyber Insurance quote for your business:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Please note: the above are common cyber insurance policy features, however, the list is not exhaustive and some features may not be offered by certain insurers. Please refer to the insurer-specific policy wording for cover inclusions, exclusions, terms and conditions.
Comments Off on Who needs Professional Indemnity Insurance?
Any company or individual that provides professional advice or services can be held liable for financial loss that occurs as a result of an act, error or omission in carrying out their work. Does this apply to you? If so, it might be time to purchase Professional Indemnity Insurance for your engineering business.
What is Professional Indemnity (PI) Insurance?
PI Insurance is designed to provide you and / or your engineering firm with financial protection against claims alleging loss as a result of your professional advice or service.
PI Insurance acts to insulate you against this financial exposure and extends to cover legal defence and investigation costs incurred arising out of a potential claim or allegation.
There are different levels of PI cover available. Cover can commence at $1 million and range upwards from this depending upon your business needs, and any limit requirements which may be stipulated in your contracts.
To read more on Professional Indemnity cover: Click here.
Do I need PI Insurance?
If you perform certain business activities it is vital to have PI cover in place, and can be a major financial risk to go without it. Essentially…
If you are a company or individual that provides professional advice or services, and can be held liable for financial loss that occurs as a result of an act, error or omission in carrying out your work, you should have PI Insurance.
As a guide, PI Insurance is important for any individual or business which:
Provides professional advice and / or services
Provides design services
Has a ‘duty of care’ in services delivered
Has an obligation to hold PI Insurance in order to fulfil contractual requirements
Carries a risk of being held legally and / or financially responsible for damages as a result of work performed
Has the potential to be joined in legal action with other parties in claims of negligence, as a result of professional services delivered. Note: Even if you cannot be held responsible, you may still be required to mount a costly legal defence, and PI Insurance can cover this expense.
If one or more of these apply to you or your business, PI Insurance is vital.
How long do you need to hold PI Insurance?
Even if a contract is finished, or you are no longer working, there is often an ongoing need for PI insurance – even after contract completion.
It is a common requirement stipulated in many contracts, that you must hold PI Insurance for a set period of time after the scope of works in a contract have been completed. If this is the case for you, it’s important to retain PI cover, even once you have completed works. This will ensure you do not breach contractual conditions.
Contract requirements aside, PI claims can still come to light many years after delivering your services, making it important to maintain cover for an extended period. Why? PI Insurance is what’s known as a ‘claims made’ insurance policy. This means that to be insured, you must have PI Insurance in place at the time of claim notification. It does not matter whether you had a policy in place at the time you performed the work, if you don’t have coverage in place at the time of claim notification, you would not be covered for any damages sought against you.
For more detail on why not to cancel PI insurance due to ongoing risk exposures – click here
If you do decide to cancel your PI insurance, Run-off cover is essential to maintain financial protection against any ongoing risk exposures – read more on Run-off cover by clicking here.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Why are my PI Insurance premiums so high when I don’t consider myself a ‘high risk’ business?
A large number of engineering businesses across many different disciplines are currently grappling with sky rocketing Professional Indemnity (PI) Insurance premiums.
Below we provide an update on the current state of the PI Insurance market, explain why premiums are increasing, the disciplines most affected, and steps you can take to help minimise premium increases, and make them more manageable.
The current state of the PI insurance market
PI Insurance is currently experiencing significant premium increases.
Dependent on the nature and scope of activities performed, premium increases for engineers starting at 20% are now a common occurrence.
Restrictive PI Insurance policy conditions and coverage exclusions are being applied to many engineering occupations that are classed as ‘high risk’ by insurers.
PI Insurance is becoming harder to place (source coverage) across the insurance market, with insurers declining to provide insurance quotes for occupations and business activities deemed as high risk.
The size of the PI Insurance market is diminishing both in Australia and into Lloyds of London. We are witnessing insurers either:
withdraw from the PI Insurance market, or
reduce their capacity to provide cover due to the impact of poor loss ratios (high cost of claim payouts / high frequency of claims) on profit performance.
To summarise: In general, Australian insurance markets are hardening. We are witnessing rate increases across the majority of PI Insurance policies, even those that fall into lower risk occupation categories.
Why are PI Insurance rates increasing?
Over a sustained period, PI Insurance companies have experienced high loss ratios. This has subsequently placed upward pressure on insurance premiums, invoking tighter policy conditions e.g. higher excesses, cover exclusions, and restrictions on the insurers’ risk appetite (i.e. risks they are able to cover).
What is a ‘high loss ratio’?
A high loss ratio occurs when an insurer’s claims pay-outs make up a high proportion of the total funds in the insurer’s premium pool. This can present a problem, because having an overall loss ratio that is too high, can put an insurance company into poor financial health.
If the insurer exhausts their premium pool with too many claims payments and not enough incoming premium to grow the total premium pool, they would be unable to pay insurance claims.
As an example, a confidential PwC report found that PI insurers for building certifiers and surveyors wrote $40m in premiums in one year, but one insurer alone faced cladding-based claims worth $50m. Evidently, this is not profitable for the insurer, and puts substantial pressure on an insurer’s bottom line, forcing them to take measure to bring their premium pools back into balance.
In response to high loss ratios, insurers may take the following measures:
Increase PI Insurance premiums in an attempt to remediate loss ratios,
Acquire more capital from their re-insurer to top up the funds, and / or,
Place restrictions on the types of risks that can be underwritten. E.g. decline insurance cover on high risk occupations more likely to suffer a sizable loss i.e. fire engineers that are at risk of being held partially liable for damage to buildings with non-compliant cladding, or highly flammable building materials.
As evident in the PI Insurance market trends canvassed above, this scenario is currently occurring in Australian insurance markets, where international reinsurance companies that fund insurers, are dictating higher rates back to Australian insurers. This ensures re-insurers can keep premium pools in balance and continue to pay claims. The very unfortunate result of this is that Australian insurers have their hands tied, and are forced to pass on higher PI Insurance premiums, and cover restrictions to the end client.
Engineering disciplines considered high risk by insurance companies:
Engineering disciplines currently most affected by the hardening PI Insurance market in Australia are:
Geotechnical engineers
Structural engineers
Fire engineers
SCADA/ Process Control engineers
Defence engineers
Engineers performing rail related works
Aerospace engineers
Steps to help PI Insurance premiums become more manageable:
1. Is the cover right for you?
Speak to a professional PI Insurance broker who can perform a thorough risk analysis, provide specialist advice on the level of PI coverage suitable for you and tailor a PI policy accordingly.
Tailored PI cover structured for your specific circumstances (e.g. contracts, activities, location, experience etc.) can help ensure your PI coverage works where it needs to, and eliminates unnecessary spending on excessive cover limits, redundant cover inclusions, and inappropriate excess levels.
2. Time is of the essence
The more notice you provide before the PI Insurance cover is required, the better! We cannot emphasise this enough.
It can take time to access local and international PI Insurance markets to source the best possible options for your risk exposures, negotiate policy conditions and structure the PI Insurance program.
To achieve the best possible outcome for coverage and premium, contact EngInsure AT LEAST ONE MONTH before your renewal or the date coverage is required. This is particularly important for PI policies with higher limits.
3. Increasing excesses to lower the policy premium
In some cases, increasing your PI Insurance policy excesses can help to reduce insurance premiums. Be sure to discuss this option with your EngInsure Insurance Advisor, who can explore this and negotiate on your behalf.
4. Detail is absolutely everything
As a specialist PI Insurance broker, it is our job to represent you. We are continually negotiating with PI Insurance companies to reduce premiums where possible, and remove blanket or unfair excesses where they don’t apply.
Providing detailed information is critical for two reasons:
To enable insurers to accurately rate and underwrite your PI risk,
To enable EngInsure to negotiate and achieve the best possible PI Insurance policy premiums and cover conditions.
Information gaps in a PI proposal form will always see insurers assume the worst – loading premiums, and / or imposing restrictive policy conditions.
5. Robust risk management measures – tell insurers about the good stuff!
Does your business have a robust Risk Management Plan in place? A Risk Management Plan with clear measures to protect your business from the likelihood of a PI Insurance claim occurring, and that limits the size of a PI claim can be viewed favourably by insurers when assessing your risk.
If you have a Risk Management Plan in place, make sure you share all of this information with the insurer! By demonstrating a clear strategy to limit PI Insurance claims, and minimise the chances an insurer will need to pay a claim, it may help to reduce your insurance premium.
Examples of risk management measures to lower PI risk may include:
Well written contracts, limiting liability
Managing staff qualifications and enforcing high training standards
Fastidious digital record keeping and centralised data management
6. Your website
Before the rise of the internet, PI Insurers previously looked at business brochures, capability statements and other marketing materials to understand more about the company they were insuring. These days however, insurers use your website to discover more about your engineering firm, and the services offered.
This can be an advantage or disadvantage depending on the look, feel and accuracy of your website. Consider whether the services and company information detailed on your website are a true and accurate reflection of the work currently undertaken. Over-inflated or inaccurate information can do you a disservice when insurers are applying premiums and policy conditions.
7. Premium Funding
Premium Funding is a flexible financial solution that enables businesses to spread the cost of insurance premiums over equal monthly instalments of up to 10 months.
Removing the financial burden of a lump sum insurance payment can help you maintain quality PI Insurance coverage, while freeing up cash flow. This enables you to utilise finances which would otherwise have been spent on insurance, to proceed with investments essential to business growth.
Points to note on Premium Funding:
Tax deductible – generally businesses can claim a deduction on interest expenses. Speak to your accountant for advice on what applies to your individual circumstances.
Low cost – generally a low-cost financing option with competitive fixed interest rates
Simple application process – far simpler than applying for a bank loan and requires fewer background checks and credit reports.
No guarantor – premium funding doesn’t require personal guarantees, or charges over business or assets
Should you wish to take up Pemium Funding, please speak to your EngInsure Insurance Advisor.
Weighing up price v’s quality
Remember the age old saying…”poor man pays twice”? When comparing the price of PI Insurance cover options, try not to compromise on quality unless you absolutely have to. If one PI policy is substantially cheaper than all the others, it is probably for a reason. Tread carefully, otherwise it may come back to bite you in an insurance claim.
As PI Insurance specialists, we understand and really sympathise with how difficult it can be to obtain cover for a ‘reasonable’ premium at present. EngInsure advisors can assist with advice and recommendations to help you weigh up all the available cover options to achieve the best possible outcome for your business.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Insurance Health Check for engineering business owners.
Does your Business Insurance still align with your risk exposures?
The risks your engineering firm faces are continually evolving – particularly in today’s economy.
Whether it be the purchase or sale of assets, new legislation, developments in technology, a modification of your engineering business activities, or a change in operating location, it is crucial to ensure your Business Insurance program stays up-to-date.
Revisiting your Business Insurance program on a regular basis will ensure it accurately protects you against identified risk exposures, helping mitigate the financial impact on your business when things don’t go to plan.
Start your Business Insurance Health Check.
Ensure your insurance is sufficient to protect your engineering firm in a claim, take our simple Business Insurance Health Check to identify key areas to look out for.
EngInsure are here to support you with important Business Insurance advice and solutions. For assistance on ensuring your cover still aligns with your level of risk, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on How much Professional Indemnity cover does an engineer need?
“What limit of Professional Indemnity (PI) Insurance cover do I need?” You’re not alone, this is a question asked by a vast number of engineers when researching and requesting PI insurance cover. Unfortunately until delving deeper into the details of your business, the answer initially equates to “how long is a piece of string?”
This article explains key factors involved in assessing the level of PI Insurance you require, and how a specialist PI Insurance advisor at EngInsure can assist.
What does Professional Indemnity Insurance cover?
Any company or individual that provides professional advice or services can be held liable for financial loss that occurs as a result of an act, error or omission in carrying out their work.
PI Insurance is designed to provide you and your engineering firm with financial protection against claims alleging loss as a result of your professional advice or service.
PI Insurance acts to insulate you against this financial exposure and extends to cover legal defence and investigation costs incurred arising out of a potential claim or allegation.
Levels of cover can be purchased commencing at $1m and can range increasing upwards depending upon the requirements of your business, and any limit requirements which may be incorporated into your client contracts.
Coverage requirements are different for everyone. Ascertaining the right level of PI Insurance for your business can be daunting and complex, particularly with the highly unique nature of projects that engineers undertake.
EngInsure’s specialist senior PI insurance advisor, has outlined key factors that play a role when determining a suitable level of PI cover:
1. Your occupation and engineering discipline
Each engineering discipline and micro-discipline carries a different level of risk. The level of risk associated with certain business activities is important when considering how much cover is required. High risk engineering disciplines generally require a greater limit of PI cover, including legal defence costs, to ensure sufficient protection of your assets.
Business activities that are considered higher risk, are generally deemed so, because:
they experience PI claims at a higher frequency or severity
they tend to include high value projects / contracts that can lead to large losses and significant levels of compensation sought when errors are made, or
they encompass projects that have a high number of interested parties, and are therefore extremely costly with extensive legal proceedings when something goes wrong.
2. CONTRACTUAL and statutory requirements
Contracts Many engineering contractual agreements stipulate a minimum level of PI insurance cover as a condition of the contract.
Statutory requirements Certain engineering disciplines are required by law to have a minimum level of PI Insurance in order to provide a professional service, for example to maintain Statutory Authority registration requirements.
It is important to note that while statutory requirements, or conditions imposed in a contract can help determine the level of PI cover needed, this is not necessarily an accurate guide. It is merely the minimum level of cover you must hold to perform work.
There are a number of factors to consider when making a decision on an adequate PI cover limit. It is worth speaking to a PI Insurance specialist who can help determine a suitable level of cover relative to your business risks outside of regulations and contracts.
3. The value of the contract / project
The value of your projects and contracts are a key determinant in how much PI cover you need. If your work forms part of a multi-million dollar project, and an error you make causes a major problem, legal action could be taken against you for the cost of the whole contract – not just your part in it. In simple terms: high-value projects and contracts need high-value PI insurance to protect you!
This concept also applies to smaller contract values. Your level of PI insurance may be less, but bear in mind, coverage levels are still affected by all the other variables discussed in this article.
4. The effect of inflation
PI Insurance coverage is provided on a ‘claims made’ basis of policy wording. A “claims-made” PI policy covers you retrospectively for all past engineering work performed after the retroactive date set out in the policy.
Essentially, this means that the current PI policy in place responds to any claim made during the current policy period, regardless of when your error or omission took place. It could be 15 years ago, but it is the current policy at the time you become aware of the claim that responds.
How does this impact the level of your PI insurance?
In many cases PI claims don’t emerge until a number of years after works have been completed. Even then, it is not uncommon to see liability claims take up to 8 or 10 years of legal proceedings before settlement is reached. This can have implications on your level of PI insurance. For example, if you are notified of a potential claim now and it takes 8 years to settle, your coverage now will need to account for what the final costs are in the future.
When setting your level of PI Insurance it is essential to consider all potential claims that might arise today; estimate the worst case scenario; and consider the effect of inflation on future costs e.g. interest rate increases, increased legal representation costs, changes in legislation and legal appeals, all of which can impact on the total cost of a claim brought against you, and your capacity to withstand the damages.
5. Your turnover or annual fee for service
Generally the higher this is, the more cover you will require. If you have a high annual turnover, you likely have a sizeable business with lots of clients, or a few very large high-value clients. In both scenarios there is a greater likelihood of claims occurring and/or for more money than a smaller business with fewer clients. Therefore, your turnover and/or annual fee income is a key factor in setting the right level of PI Insurance cover.
6. The types of clients you work with
Consider the size and sophistication of the clients you work with, and businesses you contract for. Are they large organisations with significant financial resources? Bigger companies are more likely to involve a legal team and pursue damages if there is a problem, whereas smaller businesses may be a little more ‘low key’. The type of clients you work with can have implications for the level of PI insurance you require.
7. contract indemnity clauses
Strong contract management & tightly written contracts can help to reduce the likelihood and size of claims for professional negligence. Having contract indemnity clauses, including those that limit or exclude your liability under contracts is a useful strategy for businesses engaged in high risk engineering disciplines, and in some cases can help to reduce the PI risk exposure and cover required.
How to obtain the right level of cover?
Asking a specialist PI insurance advisor can ensure you have the right level of PI insurance, and quality coverage behind you when things don’t go to plan.
An EngInsure advisor can assist in a number of ways.
We understand the scope of engineering risk across a number of specialist disciplines.
We provide specialist insurance advice & recommendations, assessing risk complexities on your behalf to ensure you receive quality insurance coverage at a level suitable for your exposures.
As professionals we take on your risk of making a poor insurance decision.
Our dedicated claims team will manage claims & advocate for the best possible outcome on your behalf.
We hold close relationships with specialist PI underwriters allowing us to negotiate the best PI policy terms and conditions on your behalf.
We only partner with specialist insurers who are in it for ‘the long haul. This provides you with security, stability, and consistency of coverage – a major factor in pricing and a long term ability to pay claims.
EngInsure are here to support you with important PI Insurance advice and solutions. For assistance on ensuring your PI Insurance cover aligns with your level of risk, please get in touch with one of our specialists:
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Coronavirus (COVID-19) has been declared a Pandemic, and is causing of great deal of unease within the community. Aside from the significant impact Coronavirus is predicted to have on our healthcare system, there are major implications when it comes to travel insurance – both for business & leisure.
EngInsure have received ongoing updates from various travel insurers regarding coverage and COVID-19. Outlined below is the most recent advice we have received from TravelCard, a leading corporate travel insurer. We will continue to provide updates as and when available.
The Australian Government has upgraded travel warnings worldwide and stated no Australian should travel overseas. Detailed information on what this means for travel insurance is outlined below.
Corporate Travel Insurance and Coronavirus
This information is likely to apply to most Corporate Travel Insurance policies. Please note, this is General Advice only. For advice specific to your travel policy, please speak to your EngInsure Advisor, or your travel insurer.
CURRENT TRAVEL ADVICE:
If you or your employees are currently overseas, return home immediately
Domestic travel booked from 19/3/2020 will likely not be covered for claims relating to COVID-19. Bookings already made should be covered (subject to the terms and conditions of the policy wording).
All travel up to 30 June 2020 should be postponed or cancelled and costs should be covered if arranged prior to the COVID-19 outbreak.
COSTS OF RETURNING HOME – CURTAILMENT COVER:
Following DFAT’s upgraded travel warning, corporate travel policyholders and employees travelling overseas should return home immediately. The expense of this should be covered under ‘Curtailment’ (subject to the terms and conditions of the policy wording) provided that you:
Did not choose to enter a country or region within a country after it was subject to a DFAT 4 warning
Did not commence the trip after 3 March 2020, when COVID-19 could no longer be considered ‘unforeseen’
Booked the trip prior to 4 March and did not travel to China, Japan, Iran and certain regions within South Korea and Italy.
It is advised that return travel should be booked before 23:59 on 22 March 2020 AEST, and to travel on the first available flight. Some travel insurance companies may be able to assist in organising these arrangements.
MEDICAL EXPENSES COVER:
It is almost certain you will not be covered for medical expenses relating to COVID-19 for trips that commenced from 13 March 2020.
With DFAT’s updated travel advice, overseas travel is highly restricted, however it is important to be aware that you will not be covered for medical expenses relating to COVID-19 if you or your employees choose to travel overseas and ignore official warnings about the risks of contracting and transmitting COVID-19.
You should be covered for medical expenses if you are already overseas. If you are currently overseas and departed prior to 13 March 2020, cover for medical expenses should be provided (subject to the terms and conditions of the policy wording).
CANCELLING TRAVEL ARRANGED PRIOR TO THE COVID-19 OUTBREAK:
Loss of Deposits (cancellation) may be covered, depending on when travel was booked. Loss of Deposits is determined by whether the COVID-19 risk could be foreseen at the time of booking. Travel booking dates likely to be considered when assessing claims for Loss of Deposits are:
Cancellation of travel booked before 30 January 2020 should be covered (except to Hubei province in China) – If you booked travel prior to 30 January (except to Hubei Province in China which was subject to a DFAT 4 travel warning from 24 January), and your travel arrangements have been directly affected due to circumstances beyond your control as a result of COVID-19 then cover should be provided for loss of deposits (subject to the terms and conditions of the policy wording).
Cancellation of travel booked between 31 January 2020 and 3 March 2020 may be covered (subject to the terms and conditions of the policy wording) – Cover depends on the extent of the COVID-19 outbreak in the country being visited at the time of booking and whether it can be considered unforeseen. Each claim will be considered based on the individual circumstances. Examples of key countries where the risk of COVID-19 may not be considered unforeseen for all or part of this period include;
China
Japan
Iran
South Korea
Certain regions in Italy
Cancellation of travel booked from 4 March 2020 is unlikely to be covered – From 4 March there is no cover for loss of deposits due to COVID-19 as it could no longer be considered an unforeseen event after that date (subject to the terms and conditions of the policy wording).
CLAIMS FOR LOSS OF DEPOSITS (CANCELLATION) IN RELATION TO COVID-19:
It is important to contact your travel provider first as it is a requirement that you take steps to minimise losses under most Corporate Travel Insurance policy wordings. Many travel providers are allowing travel arrangements to be postponed or cancelled without penalty and it is important to contact them as soon as possible to minimise non-refundable costs.
For example, Qantas and Jetstar have stated that travel credit is available until 31 March for travel booked up to 31 May 2020. Please visit the airline websites directly for accurate and up-to-date information.
Leisure Travel Insurance and Coronavirus
Leisure Travel Insurance policies generally contain an exclusion relating to Epidemic and Pandemics. This means no claims will be payable. We advise you to contact your insurance broker or insurer for further advice, and reconsider all travel, as per the latest update from DFAT – https://www.smartraveller.gov.au/.
Stay informed
The global situation is changing rapidly.
Before travelling, check for and take the advice of any travel warnings from DFAT on and WHO
Speak to your insurance broker for advice specific to your insurance program.
Manage the risk of Coronavirus
The WHO (World Health Organisation) recommends the following:
Cancel or delay any travel to affected areas until such time the crisis is over.
Practice good personal hygiene by regularly and thoroughly cleaning your hands with an alcohol-based hand rub or wash them with soap and water.
Avoid contact with anyone with a suspected case of Coronavirus
Maintain social distancing – keep at least 1 metre distance between yourself and anyone who is coughing or sneezing.
Avoid touching eyes, nose and mouth – hands touch many surfaces. Once contaminated, hands can transfer the virus to your eyes, nose or mouth. From there, the virus can make you sick.
Practice respiratory hygiene – make sure you, and those around you cover mouths and noses with a bent elbow or tissue when coughing or sneezing. If you have fever, cough and difficulty breathing, seek medical care early.
Stay home if you’re unwell. If you have a fever, cough and difficulty breathing, seek medical attention and call in advance. Follow the directions of your local health authority.
For more information click here to visit the WHO website. It is also important to stay up-to-date with Australian Government information: www.health.gov.au.
Should you have any questions regarding your travel insurance policy coverage, please contact your EngInsure Advisor.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
With allegations against engineers for breaches of professional duty becoming increasingly common, it is essential your PI insurance responds to provide financial protection in the event of a claim. Unfortunately, unwanted “hiccups” often occur come claim time if you’re not diligent in keeping your insurer informed and updated.
Maximise your PI cover and ensure you’re not left uninsured in a claim. Follow these 5 important rules…
1. Duty of Disclosure – if in doubt notify the insurer!
A claims made insurance policy means you must have a policy in place at the time you are first made aware of a claim or potential claim, or are first notified of circumstances that could lead to a claim.
What could this mean for you?
As an Insured, you have a duty to notify your Insurer as soon as you are made aware of a potential claim. If your PI policy renews and you have not declared a matter you were aware of, Insurers may look to deny an insurance claim.
In essence, any circumstance that you feel could reasonably lead to a claim, should be notified to your Insurer. However, what appears reasonable to you may not be viewed the same way by an Insurer, so the golden rule is… “If in doubt, notify”!
2. Include ALL Insured names
All of your trading entities, and consequently all entities which could possibly be drawn into legal action as a result of an alleged professional breach, must be noted as “Insured(s)” under the PI policy. You can check this on your policy schedule.
How could this impact you?
If one of your trading entities is omitted from the list of insureds on the policy and a claim is brought against that entity, it is likely you would have no PI insurance protection.
If this changes throughout the policy period, it is essential to inform your insurance adviser so we can ensure your insured entities are always up-to-date.
3. List and update ALL of your professional services
It is imperative that all business activities orservices offered by the engineering firm are noted on the PI insurance policy schedule.
How could This affect you?
An insurer could look to decline a claim if they are unaware of a business activity carried out by the engineering firm that has led to a potential claim.
If your business activities change in any way, be sure to tell your EngInsure broker so they can update this on your PI insurance policy.
4. Ensure your PI policy covers Vicarious Liability
Working with your EngInsure insurance adviser, you must always make sure your PI policy covers any possible liability you could incur as a result of the actions of consultants, sub-contractors and agents engaged by you to carry out your professional services for, or on your behalf.
What are the consequences of omitting this?
If one of these parties is found to have breached their professional duty and damages are brought against them, you could be found partially or fully liable as you chose to engage their services on your behalf.
If your policy does not cover what is termed as ‘vicarious liability’, your Insurer may decline any such claims.
5. Continuity / Continuous Cover Clause
Claims Made policies (e.g. PI insurance) generally exclude claims that arise from facts and circumstances known to the insured before the start of the policy period. Even though it could be an honest oversight, failure to notify the insurer of a ‘known fact or circumstance’ that gives rise to a claim could result in an uninsured loss.
Continuity Clauses address the above by extending cover under the policy to claims that arise through of a fact or circumstance which could have been notified under a previous Professional Indemnity policy, but the insured failed to do so.
For the Continuous Cover clause to apply, the insured must have been insured under a Professional Indemnity insurance policy issued by the insurer at the time they first became aware of the fact or circumstance that gives rise to the claim. The claim must have been covered under the previous policy, and the insured must have continuously, without interruption held a Professional Indemnity insurance policy with the insurer until the time when they notify the claim to the insurer. – Vero Professional Indemnity Glossary
Note:
This cover will usually only be provided where there has not been any fraudulent nondisclosure or fraudulent misrepresentation by the insured.
Additionally, the insurer’s liability is typically restricted to the indemnity available under the previous policy.
As indicated above, the ‘Continuous Cover Clause’ is an incredibly important policy feature to consider should you decide to change Insurers at renewal. If you switch insurers, your new PI policy will typically carry a limitation around the “continuity date” applicable to the policy – it will likely be limited to the day the new Insurer took on the policy.
We encourage you to discuss all of the factors above with your EngInsure insurance adviser, who will help ensure your PI insurance policy provides appropriate protection in accordance with your requirements as an engineer.
In summary – disclose, disclose disclose!
Each of the 5 rules we have discussed relate to your Duty of Disclosure and the information that should be disclosed to the insurer…
Before entering into a contract of general insurance with an insurer, the insured has a duty under the Insurance Contracts Act 1984, to disclose to the insurer every matter that they know, or could reasonably be expected to know, is relevant to the insurer’s decision on whether to accept the risk of the insurance and, if so, on what terms.
The insured has the same duty to disclose those matters to the insurer before they renew, extend, vary or reinstate a contract of general insurance.
Put simply, you have a duty to disclose to the insurer (or your EngInsure insurance adviser) anything and everything that may increase or change your Professional Indemnity risk. For example, notification of a possible claim, a change to your business activities, additional named insureds etc.
Remember: It’s in your best interests to keep the insurer informed! If key changes or potential insurance claims are not disclosed and you need to lodge a claim, it is very likely the claim would be denied and you would be uninsured for the loss.
EngInsure prides itself in ensuring our engineering clients have Business Insurance solutions tailored to their specific requirements. If you have any questions, or require specialist advice regarding your Professional Indemnity insurance, we are more than happy to assist.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number 229092 trading as EngInsure Insurance + Risk Services for further information or refer to our website.
Comments Off on Professional Indemnity Insurance Tips
Know what to look out for when it comes to Professional Indemnity Insurance…
1. Business activities
Your business description MUST accurately describe your business activities.
Example: To an insurer, a mechanical engineer working on the mines has a very different risk exposure to a mechanical engineer working on building services. Failing to adequately disclose the extent of your business activities can affect your cover in an insurance claim.
2. Your retroactive date
Changing your PI Insurer? Make sure your retroactive date on your new policy matches your old policy.
If your retroactive date on the new policy is later than that on your current policy, you will have a significant gap in insurance cover for your past business activities.
3. Check your policy exclusions and Limits of Liability
Does your PI policy exclude or have very limited cover for bodily injury and / or property damage? Is this an issue for you?
At first glance, PI Insurance policies often appear as though they have a $10 million Limit of Liability for bodily injury / property damage that is deemed to have occurred as a result of your work.
In actual fact, it is very common for a cover exclusion to apply here (i.e. no cover) or, for a $250,000 sublimit to apply. A $250,000 sublimit means that within the $10 million limit, you would only be entitled to a maximum payment of up to $250,000 for bodily injury / property damage claims.
If this applies to you, and presents an issue, we recommend asking your insurance broker to explore additional cover options.
4. Have there been any changes within your business? It’s your duty to disclose!
At any time, if there is a change in your business activities, or a potential claim, let your insurer know!
Under the Insurance Contracts Act 1984, the insured has a duty to disclose to the insurer anything that may increase or change the risk. For example, a change in your business activities, or a claim notification.
If you do not disclose potential claims or key changes in the scope of your business activities to your insurer, you could be left without cover in a claim.
5. Is your PI insurance part of a group policy?
EngInsure only recommend and place PI Insurance policies with standalone policy limits, ensuring clients have their own full Limit of Liability.
A group PI Insurance policy means that you are sharing the one policy limit with numerous other entities. If you choose to take out
this type of PI Insurance, it is essential to understand that the total Limit of Liability can be eroded by other policy holders sharing in this same claims ‘pool’.
Example: A group PI Insurance policy has 10 members, and the policy limit is $20 million in the aggregate. If 2 members of the group have claims paid out at $10 million each, it means the policy limit has been exhausted, and there is no cover left for the remainder of the policy period for any members.
Ensure your business has the right cover, so you can focus on what you do best.
As experts in PI Insurance for engineers, EngInsure delivers professional, impartial advice, while providing access to exclusive risk placement facilities.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Mandatory Data Breach Notification laws: Tips to protect your business
22 February, 2018 saw the Australian Government enact the Notifiable Data Breaches (NDB) scheme, requiring any organisation affected by a serious data breach to notify all individuals whose information may have been compromised. Non-compliance may result in heavy fines and penalties being imposed on both businesses and individual directors.
This article covers the full impact this new legislation can have on your engineering business, and what you can do to ensure you are protected.
Note: Some information in this article has been generously provided by leading Australian IT specialists, Surety[IT].
Data Breach Notification legislation – will your business be affected?
If your turnover is more than $3 million per year and are you governed by the Privacy Act 1998 (Cth.), or if you are a smaller engineering business handling sensitive information, then this new legislation can impact your business. The bill came into effect on February 22, 2018.
For more information about how to determine whether this applies to your business please refer to the OIAC (Office of the Australian Information Commissioner) website here:
This legislation means that businesses who discover they have been breached, or who have lost data, will need to report the incident to the OAIC Privacy Commissioner as well as notifying affected customers as soon as they become aware of the breach.
The notification must include a description of the data breach, what kind of information it was, and recommendations on how customers should respond to the security incident.
What’s the impact of not reporting it?
Any business that fails to report a data breach can face fines of up to $360,000 for individuals and $2.1 million for businesses. Given the potential fines and penalties involved, this is a legislation every organisation, large or small, must take seriously.
What is classed as a notifiable data breach in the law?
The law considers a breach to have occurred when:
Data is accessed by an unauthorised entity, and / or disclosure or loss of customer information held by a business generates a real risk of serious harm to individuals involved.
‘Serious harm’ can mean physical, psychological, emotional, economic and financial harm, in addition to reputational damage.
Data breaches are not limited to malicious actions, such as theft or hacking but can also come from internal errors or process failures that cause accidental loss or disclosure of information.
What type of data and where?
The legislation applies to anything from personal details, medical records, financial information, credit reporting information, tax file number information etc. held on any device including mobiles, USB keys, hard drives, company networks or paper records. The legislation has a very broad scope.
Here’s a few examples of where the legislation would apply:–
A mobile device containing company information is lost and there is no way of managing it remotely or ensuring that it hasn’t been accessed.
There is unauthorised access to a spreadsheet containing customer financial information.
A member of staff mistakenly emails the information of one individual to another individual.
A member of staff takes personal information of customers.
A contractor working on a database containing customer information takes a copy on their laptop and has their laptop stolen.
An IT staff member finds malicious software on a computer that computer stored confidential information.
What harm could result from a breach?
Identity theft
Financial loss
Threat to physical safety
Threat to emotional wellbeing
Loss of business / business interruption
Reputational damage
Bullying
Loss of public trust
Loss of assets
Financial exposure
Regulatory penalties
Extortion
Legal liability
What you need to do now…
Now the law has been introduced, it is critical that your engineering business has carefully planned strategies, as well as policies and procedures to:
Reduce the risk of a data breach
Swiftly manage a data breach should one occur
Minimise the severity and impact of a data breach on your business
Some areas to address:
Take out a Cyber Insurance policy to protect against significant financial loss
Review your current data security strategy
Develop a cyber security strategy that just doesn’t involve IT
Educate your staff
Develop a data breach management strategy
To keep updated with implementation of the Notifiable Data Breaches scheme, head to the OAIC’s website.
Cyber Insurance can provide financial protection for you and your engineering business
While IT strategies can help prevent data breaches, in this day and age, there is no foolproof method to guarantee total security of your data. What you CAN do however is take out a Cyber Liability Insurance policy. A Cyber Insurance policy can protect against the financial consequences of a data breach in a number of ways:
Fines & penalties – Financial compensation to recoup costs that result from a security breach – including regulatory fines – which can amount to $2.1 million.
Third party liability – Compensation for clients and customers who suffer financially or emotionally as a result of stolen data.
Legal and forensic investigation expenses – Extends to include expenses for legal counsel and representation, as well as and costs forensic investigation.
Reputational repair – Covers for the cost of professional consultants to assist in repairing damage to your company’s brand and reputation.
To ask for your Cyber Liability insurance quote, and to understand how it can protect your company’s reputation and bottom line, contact your EngInsure Insurance Adviser.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Understanding and managing contract risks
Smaller engineering companies can sometimes expose themselves to significant financial liabilities by not properly examining proposed contracts, according to a leading insurance lawyer.
Smaller engineering companies can sometimes expose themselves to significant financial liabilities by not properly examining proposed contracts, according to a leading insurance lawyer.
Matthew Curll is a partner at Hall & Wilcox. He was heavily involved in drafting the EngInsure policy, a joint initiative of Engineers Australia and Whitbread Insurance Brokers.
“A typical insurance clause is very broad and generally captures most claims,” he told a business roundtable this week.
“The devil starts to rise in relation to certain risks that you’re asked to take on in your consulting contracts. Your head contractors and principals are looking to allocate risk and they want to allocate it to you.”
He said it is quite common for a contract to include a clause along the line of: “The Contractor must indemnify the Principal against any liability incurred by the Principal arising out of or in relation to the performance of the services by the Contractor.”
Curll said such a clause is very open-ended and it is definitely worth trying to get it changed in some way, and he suggested five possible solutions.
The best option, he said was to try to get the cause deleted completely, but failing that, he suggested getting the clause amended so liability was shared proportionally between the principal, contractor and other partners according to their respective responsibilities.
“It’s worth arguing,” said Curll, “what you’re asking us to do is quite onerous and our insurer generally won’t cover that so you’re asking us to do something that’s uninsured. To the extent we’re responsible, we’ll take responsibility but we won’t take blanket responsibility.”
His third solution was suggesting liability be limited to the scope of insurance cover.
“We have some success with that,” he said. “At the end of the day, it’s not very useful for a head contractor to ask you to take on a liability for which you’re not insured.”
The fourth option was similar and can sometimes be combined with the third. It involves putting a monetary limit to the liability such as $300,000. The final option was to exclude consequential losses from the liability, although Curll said his preference was to start with the first option and work his way down the list.
He also discussed requirements that contractors assume liability for subcontractors as well as liabilities which are vague or unreasonable.
For advice regarding all of your insurance needs please contact EngInsure Insurance + Risk Services
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
With allegations against engineers for breaches of professional duty becoming increasingly common, it is essential your PI insurance responds to provide financial protection in the event of a claim. Unfortunately, unwanted “hiccups” often occur come claim time if you’re not diligent in keeping your insurer informed.
Maximise your PI cover and ensure you’re not left uninsured in a claim by following these 5 important rules below…
1. Duty of Disclosure – if in doubt notify the insurer!
A claims made insurance policy means you must have a policy in place at the time you are first made aware of a claim or potential claim, or are first notified of circumstances that could lead to a claim.
What could this mean for you?
As an Insured, you have a duty to notify your Insurer as soon as you are made aware of a potential claim. If your PI policy renews and you have not declared a matter you were aware of, Insurers may look to deny an insurance claim.
In essence, any circumstance that you feel could reasonably lead to a claim, should be notified to your Insurer. However, what appears reasonable to you may not be viewed the same way by an Insurer, so the golden rule is… “If in doubt, notify”!
2. Include ALL Insured names
All of your trading entities, and consequently all entities which could possibly be drawn into legal action as a result of an alleged professional breach, must be noted as “Insured(s)” under the PI policy. You can check this on your policy schedule.
How could this impact you?
If one of your trading entities is omitted from the list of insureds on the policy and a claim is brought against that entity, it is likely you would have no PI insurance protection.
If this changes throughout the policy period, it is essential to inform your insurance adviser so we can ensure your insured entities are always up-to-date.
3. List and update ALL of your professional services
It is imperative that all business activities orservices offered by the engineering firm are noted on the PI insurance policy schedule.
How could This affect you?
An insurer could look to decline a claim if they are unaware of a business activity carried out by the engineering firm that has led to a potential claim.
If your business activities change in any way, be sure to tell your EngInsure broker so they can update this on your PI insurance policy.
4. Ensure your PI policy covers Vicarious Liability
Working with your EngInsure insurance adviser, you must always make sure your PI policy covers any possible liability you could incur as a result of the actions of consultants, sub-contractors and agents engaged by you to carry out your professional services for, or on your behalf.
What are the consequences of omitting this?
If one of these parties is found to have breached their professional duty and damages are brought against them, you could be found partially or fully liable as you chose to engage their services on your behalf.
If your policy does not cover what is termed as ‘vicarious liability’, your Insurer may decline any such claims.
5. Continuity / Continuous Cover Clause
Claims Made policies (e.g. PI insurance) generally exclude claims that arise from facts and circumstances known to the insured before the start of the policy period. Even though it could be an honest oversight, failure to notify the insurer of a ‘known fact or circumstance’ that gives rise to a claim could result in an uninsured loss.
Continuity Clauses address the above by extending cover under the policy to claims that arise through of a fact or circumstance which could have been notified under a previous Professional Indemnity policy, but the insured failed to do so.
For the Continuous Cover clause to apply, the insured must have been insured under a Professional Indemnity insurance policy issued by the insurer at the time they first became aware of the fact or circumstance that gives rise to the claim. The claim must have been covered under the previous policy, and the insured must have continuously, without interruption held a Professional Indemnity insurance policy with the insurer until the time when they notify the claim to the insurer. – Vero Professional Indemnity Glossary
Note:
This cover will usually only be provided where there has not been any fraudulent nondisclosure or fraudulent misrepresentation by the insured.
Additionally, the insurer’s liability is typically restricted to the indemnity available under the previous policy.
As indicated above, the ‘Continuous Cover Clause’ is an incredibly important policy feature to consider should you decide to change Insurers at renewal. If you switch insurers, your new PI policy will typically carry a limitation around the “continuity date” applicable to the policy – it will likely be limited to the day the new Insurer took on the policy.
We encourage you to discuss all of the factors above with your EngInsure insurance adviser, who will help ensure your PI insurance policy provides appropriate protection in accordance with your requirements as an engineer.
In summary – disclose, disclose disclose!
Each of the 5 rules we have discussed relate to your Duty of Disclosure and the information that should be disclosed to the insurer…
Before entering into a contract of general insurance with an insurer, the insured has a duty under the Insurance Contracts Act 1984, to disclose to the insurer every matter that they know, or could reasonably be expected to know, is relevant to the insurer’s decision on whether to accept the risk of the insurance and, if so, on what terms.
The insured has the same duty to disclose those matters to the insurer before they renew, extend, vary or reinstate a contract of general insurance.
Put simply, you have a duty to disclose to the insurer (or your EngInsure insurance adviser) anything and everything that may increase or change your Professional Indemnity risk. For example, notification of a possible claim, a change to your business activities, additional named insureds etc.
Remember: It’s in your best interests to keep the insurer informed! If key changes or potential insurance claims are not disclosed and you need to lodge a claim, it is very likely the claim would be denied and you would be uninsured for the loss.
EngInsure prides itself in ensuring our clients have Business Insurance solutions tailored to their specific requirements. If you have any questions, or require specialist advice regarding your Professional Indemnity insurance, we would be more than happy to assist.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number 229092 trading as EngInsure Insurance + Risk Services for further information or refer to our website.
Comments Off on Does your business have a risk register?
A simple risk register could prevent potentially catastrophic outcomes.
What is a Risk Register?
A Risk Register is a central repository listing all potential risks associated with either operating your business generally, or undertaking an individual project. This master document not only lists potential risks, but grades them according to their likelihood of occurrence and seriousness of their impact, as well as plans and procedures to avoid or mitigate the identified issues.
A risk register is a necessary tool for any organisation to utilise as part of a broader risk management strategy, to ensure there are clear guidelines and procedures in place to lessen the impact of any unfortunate occurrences. It is also a useful tool to assist businesses with executive decision making, by weighing both benefits and negative impacts of undertaking new business.
Getting started
To get started, we recommend appointing an individual or small committee to develop your risk register. Those appointed will take ownership and responsibility of analysing risk within your business, developing strategies to minimise any potential risk, and collating a clear set of policies and procedures to guide ongoing management of risk.
Analysing Risk
The first step of analysing risk associated with your business or project is to list all possible occurrences that could have potentially negative outcomes for your organisation – these occurrences may affect your business in a myriad of ways, including in a financial, reputational or fulfilment capacity.
Once you have listed all potential risks with a brief description, you will need to list them in order of priority. This may be difficult, as one risk may appear severe but upon further investigation, is extremely unlikely to occur.
These simple tables may assist you in prioritising your risks.
Risk Treatment
Once you have analysed the risk inherent in your business or project, you will need to individually review how you will ‘treat’ each risk. By treating each risk, you may be eliminating or lowering the likelihood of occurrence, or mitigating the potential severity of any consequences if the risk is realised.
Some common risk treatments include:
Identifying risks that can be easily eliminated by adjusting operations
Discontinuing any activity where the risk has been identified as unacceptable
Transferring financial liability by contracting an insurer for significant and necessary risk
Developing specific policies or guidelines to determine actions in situations that have been identified as involving risk
For any risk that cannot be eliminated or transferred, appropriate mitigation actions must be taken to lower the risk to a level that is comfortable for you. If businesses do not take appropriate measures to eliminate, transfer or mitigate these risks, often the financial outcomes outweigh the capacity of the business, leading to catastrophic consequences.
Next Steps
A vital part of developing a risk register, as well as a broader risk management plan, is ensuring that currency is maintained. A risk register will not form part of an effective risk management strategy if it is not updated with any new activity, and if regular audits are not completed.
We recommend that your risk management team schedule regular risk register audits to account for any new projects or changes in circumstance. It is similarly imperative that any related policies and procedures are reviewed and updated on a yearly basis to minimise any unnecessary risk.
Make sure you stay up to date with our Insights blog, for further details on how to protect yourself and your engineering business.
Need some help?
A clear and comprehensive risk management program can ensure your business is equipped with the necessary tools to effectively respond and manage hurdles that threaten your commercial success.
EngInsure’s specialist risk consultant will work closely with your key people to develop and implement an effective risk management strategy.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
Comments Off on Professional Indemnity Insurance – Frequently Asked Questions
Why is PI insurance required?
Professionals such as engineers are considered experts in their field, and as such are presenting themselves as having special skills or expertise on which members of the community can rely. This reliance attracts a duty of care.
If a professional engineer breaches their duty of care by making an error or omission, then those persons affected are legally entitled to claim damages against the engineer. Claimants seeking payment for damages can sometimes amount to millions of dollars.
What does PI insurance cover?
Professional Indemnity Insurance is designed to provide you and your business with financial protection against claims alleging loss as a result of your professional advice or service.
Professional Indemnity Insurance acts to insulate you against this financial exposure, even extending to cover your legal expenses in the defence of a potential claim.
Covered features can include:
Loss of documents
Reinstatement of Indemnity Limit
Advancement of costs and legal expenses
Defamation
Please note: These are some of the more common policy features, however please refer to your specific policy wording for inclusions, exclusions and terms and conditions.
How much cover do I need?
Determining a suitable level of Professional Indemnity cover can be complicated, as every business is different. Some key factors that may impact your insurance requirements are:
your business turnover,
the degree of risk inherent in the services and activities you provide,
your PI insurance claims history.
It is imperative that you carefully consider the level of cover, and the PI insurance policy that is best for you or your business. A common mistake made by many, is purchasing the bare minimum level of cover required. In the unfortunate event of a claim, being underinsured can have potentially devastating financial ramifications.
Ensure your level of PI Insurance cover is sufficient – speak with one of EngInsure’s qualified PI insurance specialists. EngInsure advisers can provide personal advice specific to your circumstances.
Where can I find out more?
For further information about securing Professional Indemnity insurance for you or your business, contact a member of the EngInsure Insurance & Risk Services team on 1300 854 251 or click to submit your online enquiry.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
companies share the risk.
completely paralysed, unable to trade without their key systems (e.g. emails, zoom, client records, files, payment systems, operating systems etc.). This downtime can have a serious financial impact.
responding to a cyber incident in real time. This includes IT security and specialist forensic support, legal advice in relation to breaches of data security, PR specialists to mitigate brand damage, and the cost associated with notifying any individuals e.g. clients or suppliers who have had their data stolen.
