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Filtering by Tag: Insurance

Who needs Professional Indemnity Insurance?

Kerri Day

What is Professional Indemnity Insurance?

Professional Indemnity Insurance provides cover for potential threats such as alleged negligence or breach of duty arising from an act, error or omission in the performance of the professional services that you may provide. A Professional Indemnity policy provides protection for you and your assets against claims for financial loss, injury or damage to you and your business up to the sums insured in your policy schedule. The limits that you may need to consider range from $1,000,000 up to $20,000,000 in cover.



Who should consider Professional Indemnity Insurance?

A Professional Indemnity policy is designed for anyone who gives advice and/or services of a skilful level, according to an established discipline, to another person or business.

Professions that may require this cover include

Advertising agency

Advertising agency

How much do i need?

Choosing the appropriate professional indemnity insurance (PI) limit to purchase is not straightforward. There are several key factors that should be considered when deciding the limit that is right for your business. The selection of the most appropriate limit should be driven by your desire to protect your business and personal assets. All too often I see business owners purchase the minimum (PI) limit possible in order to satisfy their statutory or contractual obligations. Just because the limits have been set as a minimum requirement doesn’t necessarily mean you will not be out of pocket at the time of a claim.

Some of the key factors you may consider when reviewing or deciding your policy limit are:

Statutory Requirements

Many industries such as bookkeepers, certifiers and mortgage brokers are often subject to compulsory insurance limits to support a statutory registration or accreditation. These limits can vary between states and industries.

Project Values and Types

It is a common view that a high contract value requires a high limit of insurance and a low contract value has reduced professional negligence exposure. This factor should not be used as an independent measure however. Significant professional indemnity claims can result from a low value project.

Perceived Exposures

After the above points have been considered it is now time to assess the possible causes of loss, injury or damage that may give rise to a professional negligence claim.

Assessing the perceived exposure may be broken into the following 3 considerations:

 Financial loss

Monetary loss suffered by a third party as a result of an actual or alleged breach of professional duty. Example - Financial loss due to a delayed completion of a building contract due to an actual or alleged breach of professional duty by the project manager.

Property damage

The resultant damage to property could be a consequence of an actual or alleged breach of professional duty. Example – A support beam collapses in a building due to a design engineer under specifying the diameter of the beam. The collapse of the building has the potential for causing property damage to tenants of the building, neighbouring properties and public property.

Personal Injury (or Death)

Injury (or death) could result from an actual or alleged breach of professional duty of care. Example – Using the same example as above personal injury could occur due to the collapse.

A common misconception is that such risk is insured under a public liability policy. Public liability policies usually contain a specific exclusion in relation to claims arising from the provision of professional services therefore personal injury claims are a core professional indemnity exposure for many professionals.

Ability to retain risk

The extent to which you are prepared to expose your assets by either accepting higher excess or lower policy limits and your ability to control the risk or transfer liability to other parties involved should also be part of the assessment.

To the extent that any of the above content constitutes advice, it is general advice without reference to your needs or objectives and therefore cannot be relied upon. Before acting on the above information you should obtain advice specific to your needs.





Five by Five from an Insurance Broker

Kerri Day

Upgrading your qualifications to become a builder is a fantastic achievement and means you can now delve into those larger projects you have always wanted to manage. But with the new qualification comes new responsibility and this can raise some questions regarding insurances.

Below are FIVE questions I commonly get asked by new builders and a brief overview to get you started.

ONE - What is Contract Works Insurance?

Contract works insurance, sometimes referred to as construction insurance, is a very familiar term to builders, it is a common requirement in building contracts and financial institutions usually require it as loan security. But there is no one policy that suits all situations and builders should take particular care when arranging a policy.
Contract Works Insurance policies insure the construction-related activities of a construction project into one package policy, covering the interests of all parties involved in the development. Covered parties include the project owner, general contractor, subcontractors, and in some cases, materials and equipment suppliers.

TWO - What does Contract Works Insurance cover?

Contract Works Insurance covers accidental risks of physical loss or physical damage to the contract works during construction as well as third party liabilities.

Limits under Contract Works Insurance policies are based upon the full estimated contract value. Sub-limits apply to certain coverage extensions, and a specific limit will apply to the Public and Products Liability section.  
Public and Products Liability provides protection for amounts you may become legally liable to pay for compensation in respect of third party personal injury or property damage, as a result of an occurrence in connection with your business activities.
Contract Works Insurance is an all-risk policy that is subject to policy conditions.

THREE - Who is responsible for pre existing property cover?

This is a common question asked by Builders and property owners: it is the responsibility of the property owner to effect and maintain insurance on their property, unless the building contract states otherwise.
To avoid any conflict both parties should start by checking the insurance clauses in the building contract. These clauses will clearly set out the obligations of all each party to arrange the various insurance policies needed.
If you find that the contract doesn’t mention insurance for pre-existing property, it will continue to be the property owner’s responsibility just as it was prior to the works due to the fact that the building contract has changed nothing in this regard.
It is a common mistake that builders often assume that the their public liability policy will be sufficient to protect the owner’s property, as this policy covers the builder’s liability for damage to third party property (including the owner’s). The problem with making this assumption is that public liability cover does not directly insure the owner’s property. Public liability only insures the builder’s legal liability and the builders negligence would need to be proven for the policy to respond.

FOUR - Do I need cover for tools and equipment?

Loss or damage to your tools of trade and equipment can delay work until they are replaced. It is wise to consider the cover you have for your tools and equipment. Many policies may exclude tools while they are left onsite or accidental damage.  There may be provision on a contract works policy for tools cover but be aware that the owner of the tools needs to be an insured on the policy.
In the event of a claim you may need to provide proof of purchase. A good way to have this on hand is to keep the purchase receipt or photos of the items in case they are stolen.

FIVE - What is Home Warranty Insurance?

Home Warranty Insurance protects consumers from financial loss caused by a builder's failure to rectify or compensate for defective or incomplete residential building work. The conditions vary depending on which state the work is being conducted.
Builders are responsible for taking out Home Warranty Insurance at the time of entering into a building contract with a homeowner.
The extent of cover and requirement varies from state to state and are subject to legislative changes.
In NSW any contract for residential work that is over $20,000 requires Home Warranty to be taken out. This may be lower in some states.
For more information on Home Warranty in NSW visit

““Five by Five is a radio communication that means loud and clear. The radio expression goes back to the 1950’s ‘All right, testing, one, two, three ... Five by Five Mr Holloran’ (Hunter, Blackboard Jungle 1954)””