Professional Indemnity Insurance

Tail Reporting Coverage

Tail reporting cover is an add-on that the insured can purchase along with professional indemnity. It is also known as extended reporting endorsements cover, which is a type of insurance that covers the incidents that occurred within the tenure of the indemnity insurance but were not reported until the termination of the policy.

Extended coverage is offered by some insurance companies if the insurance policy remains non-renewed for that time. Of course, the extended coverage gives rise to the premium, which has to be paid if the tail reporting coverage needs to be used for claims.

Professional Indemnity Insurance Policy - Limit of Indemnity

Let us now tell you about the Limit of Indemnity in the professional liability insurance policy:

• The sum insured in professional indemnity insurance is known as the Limit of Indemnity.
• This limit is set per accident and per policy period.
• It is referred to as Any One Accident (AOA) limit and Any One Year (AOY) limit respectively.
• The ratio of AOA limit to AOY limit can be chosen.
• The AOA limit, which is the maximum amount payable for each accident, should be predetermined.

The ratio options for AOA limit to AOY limit, along with their meanings and examples, are provided in the table below:

Note 1: The AOA limit should be determined based on factors such as the insured's nature of the activity, the potential number of people affected, and potential property damage in the worst-case accident.

Note 2: When considering the coverage, it is important to assess the adequacy of the sum insured and the chosen extensions.

You may also read: Indemnity Insurance for Chartered Accountants

Who can Purchase Professional Indemnity Insurance?

Professional indemnity or Errors and Omission insurance can be availed by individuals or companies providing professional services. Here is a table of individuals and entities that can purchase professional indemnity insurance policy:l

Factors to Consider When Purchasing Professional Indemnity Insurance:-

Here are certain factors that you should keep in mind while purchasing professional liability insurance:

1. Decide on the Right Sum Insured

   Choose an appropriate sum insured based on the nature and magnitude of risks associated with your business, ensuring adequate coverage for potential claims.

2. Be Transparent with Information

   Full disclosure is crucial when obtaining insurance. Provide all relevant details, no matter how insignificant they may seem, to avoid claim rejection and ensure the effectiveness of the insurance policy.

3. Align Insurance Features with Business Needs

   Ensure that the professional liability insurance policy's features align with your business requirements. If your business, deals with international clients, it is advised toopt for a policy that provides coverage beyond domestic borders to meet your specific needs.

How Professional Indemnity Insurance Works?

Here’s how it works:

• Claims may arise due to your or your employee’s negligence, errors, etc., while rendering professional services to clients, leading to significant financial losses to your business.
• Professional indemnity coverage is mainly provided on a claims-made basis, i.e. it will typically cover claims related to incidents that occurred or were discovered during the policy period.

Here’s a condition:

• Any claims filed for an incident that occurred before the retroactive date of the policy coverage may not be covered by the insurance company.

Professional Indemnity Insurance: Triggering Event

A triggering event for the professional indemnity insurance policy is typically when a claim is made against the insured for an alleged error, omission, or negligence in their professional services. Let's consider a case scenario to understand this:

Case Scenario:

Dr. Sharma is a surgeon who specializes in orthopedic procedures. He has a professional indemnity insurance policy in place. One day, Dr. Sharma performs a knee replacement surgery on a patient, Mr. Varun. However, during the surgery, Dr. Sharma inadvertently makes an error, resulting in complications for Mr. Varun.

As a result of the surgical error, Mr. Varun experiences prolonged pain, limited mobility and requires additional medical treatment and rehabilitation.

Dissatisfied with the outcome, Mr. Varun decides to take legal action against Dr. Sharma, claiming medical negligence and seeking compensation for the damages he has suffered.

In this scenario:

• The triggering event for Dr. Sharma's professional indemnity insurance occurs when Mr. Varun files a claim against him, alleging professional negligence.
• Dr. Sharma notifies his insurance policy provider about the claim, and the insurer initiates the claims process.
• The professional indemnity insurance policy coverage is triggered, and the insurer begins investigating the claim and assessing its validity.
• If the claim is deemed valid, the insurer may provide financial coverage for legal expenses, settlement costs, or damages awarded to Mr. Varun, up to the policy's specified limit of indemnity.

Note: The Professional Indemnity Insurance coverage is typically triggered when a claim is made during the policy period, regardless of when the alleged incident actually occurred.

Professional Indemnity Insurance: Claim Process

In the event of an incident necessitating a claim, here are the steps to follow:

• Step 1: Inform your assigned relationship manager about the incident.
• Step 2: The claim handler will send a claim intimation format, which you must complete and submit. You will asked to provide the following details.
  • Policy No.
  • Insurance Company Name
  • Policyholder’s Name
  • Address of the Policyholder
  • Date of Incident
  • Brief detail of the Incident
  • Estimated loss amount
  • Address of the site of the incident
  • Name & Contact details of the person at the site of the incident.
• Step 3: Once your claim is assessed and registered, a claim reference number will be issued.
• Step 4: After generating the claim reference number, the insurance company will depute a surveyor or share the List of Requirements (LOR) in order to proceed further with the claim process.
• Step 5: The insurance company will send a claim form that you will have to fill up, sign and stamp with the company seal and then submit it along with the LOR. (In the case of professionals, if they have a seal, they can use that to stamp on the claim form).

  Here is the list of documents required for KYC:

  • PAN Card
  • Aadhar Card
  • GST Registration Certificate
  • Address proof of the location of the incident
  • Electricity Bill

  Disclaimer: These are the basic documents required. However, in case of any additional requirement/LOR, the insurance company will inform the Policybazaar claim handler who will then inform and help you in collecting and submitting them to the insurance company.

• Step 6: If an ongoing court case, provide the insurance company with all the relevant details related to the legal proceedings
• Step 7: Once the court case ends and the judge finalises the compensation amount in the court’s final verdict, the insurance company will have to pay that amount to the insured as per the policy terms and conditions.

Disclaimer: The coverage for lawyer's fees is limited to a specific percentage of the sum insured amount, as specified in the insurance policy. For instance, if the sum insured amount is Rs. 100 and the coverage for lawyer's fees is set at 25% of the sum insured, the insured will receive coverage for lawyer's fees up to Rs. 25, not exceeding that amount. This is subject to the terms and conditions outlined in the insurance policy

Also, in some cases, if the insurance company wants, they can deploy their lawyer in service of the insured; however, if the insured has already deployed his lawyer, then the coverage will be provided as per the above-mentioned condition.

What is the Retroactive Date in Professional Indemnity Insurance?

The retroactive date is the date that the insured first bought the policy and kept renewing without any break in the coverage.

Let's take an example to illustrate the concept more clearly:

• A doctor purchased a professional indemnity insurance policy from XYZ Insurance Company on January 1, 2020. The policy remained valid until December 31, 2020. However, the doctor was dissatisfied with the coverage provided by XYZ Insurance Company and decided to switch insurers.
• To ensure continuous coverage without any gaps, the doctor promptly renewed the professional indemnity insurance policy with ABC Insurance Company, effective from January 1, 2021. In this scenario, January 1, 2021, serves as the inception date for the new policy, while the retroactive date remains January 1, 2020.
• Now, let's consider a claim arising from an incident that occurred when the doctor was covered under the professional indemnity policy of XYZ Insurance Company, specifically on June 1, 2020.
• Since there was no gap between the two policies and the new insurer, ABC Insurance Company, ensured continuous coverage, they will provide coverage for the claim arising from the period when the doctor was insured under the previous policy from XYZ Insurance Company.

Transferring Retro-active Date from Old Insurer to New One

Transferring retroactive date from the old insurer to the new one refers to the point when the new insurer takes the responsibility to provide coverage for any claim that might come up from the policy tenure of the old one.

*Condition: There should be no gap between the old policy and the new one.

What is Professional Indemnity Insurance for Doctors?

Professional indemnity insurance for doctors provides specialized coverage against claims for negligence, errors, or omissions in their services. It safeguards doctors from financial losses and allows them to focus on quality care without constant litigation concerns. The insurance includes legal defense, settlements, and damages, up to the policy limit.

Why Buy a Professional Indemnity Insurance Policy from Policybazaar for Business?

• Expert Advisory: Our business risk consultants provide personalized guidance tailored to your needs.
• Dedicated Relationship Manager: You'll have a dedicated relationship manager offering continuous support and guidance to protect your business against potential risks.
• 365-Day Claims Assistance: Our claims specialists are available every day to ensure efficient processing of your claims throughout the year.
• Competitive Pricing: With our extensive network of insurer partnerships, we offer competitive quotes from top insurers, ensuring you get the best rates

Professional Indemnity Insurance- FAQs