Engineering is a highly specialised and complex industry, more so than ever in today’s increasingly regulated environment
Any company or individual providing professional advice or services that can significantly impact clients’ lives and businesses – including engineers, consultants, builders and designers – are at risk of claims related to breaches of professional duty. This means you can be held liable for financial losses occurring as a result of error, omission or professional negligence when carrying out your work…along with the legal liabilities incurred throughout the process.
Unfortunately, in Australia’s increasingly litigious society, such claims are becoming common place.
Professional indemnity insurance
Professional indemnity (PI) insurance helps cover legal expenses, damages and other costs associated with defending against these types of claims. It is designed to insulate you and your business against financial exposure, even if a claim against you fails in court.
However, insurance providers have a maximum threshold for coverage (often called a ‘limit of liability’ or ‘limit of indemnity’) – this represents the maximum amount your insurer will disburse across a single or multiple claims…
What if you need more cover?
Sometimes you may need to insure for higher levels of cover than your PI insurance provides.
This might be due to taking on a large or high-risk contract, or a client requires a specific amount of cover to ensure they will not be overexposed and underinsured.
Whatever your reasons for needing additional care and cover, excess layer insurance is your solution.
Excess layer insurance
Known as ‘excess of loss insurance’, excess layer insurance provides additional cover beyond and in addition to your primary PI insurance policy.
That is, in the event a claim is made against you, the primary policy covers costs up to its limit. Should your claim surpass this limit, the excess layer insurance policy takes effect, offering coverage for the remaining amount up to its limit, and so on.
The excess layer only comes into play if a claim exceeds the coverage limit of the primary policy, and you have the option of acquiring as many additional ‘layers’ of cover as required to achieve the required limit.
Sizable professional services firms might easily have multiple insurance policies providing support as required, spreading the risk and safeguarding and reinforcing their overall protection position.
For example
Insurer A provides you with a primary PI insurance policy for claims of up to $10 million.
However, you have a large client who requires that you carry PI insurance of $20 million.
Your insurance broker can provide a separate excess layer policy for the additional $10 million cover with a different insurance company.
The excess layer policy will follow the Primary policy terms and conditions of cover to ensure consistency of coverage across the total combined limit.
The two policies combined are now providing you with the required $20 million coverage.
Engineer protected. Client reassured.
How much does excess layer insurance cost?
The cost of excess layer insurance is typically less than the cost of the primary PI policy.
Why? Because the level of risk is diminished based on the Primary PI policy limit needing to be fully eroded before the excess layer policy is called upon to respond to any claims.
The bottom line is that excess liability coverage is not just an option for industries susceptible to particular types of claims; it’s a necessity for engineering firms to achieve the higher limits of cover which may required due to risk exposure and contractual requirements.
And while a standard PI policy empowers you with greater control and security over the future of your business, additional excess coverage provides you with absolute assurance when providing advice and services to your clients.
Click here for more information about professional indemnity insurance for engineers , or if you would like personalised advice regarding excess layer insurance relating to 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:
T: 1300 854 251
E: info@enginsure.com.au
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.
