A Professional Indemnity claim is one of the most common underlying causes for small to medium businesses going to the wall.  This is usually because dealing with the claim takes up so much time that the proper running of the firm is neglected.  Even where the allegation is unfounded and the insurance only has to fund the defence the time taken away from the business can be very damaging.

When a claim does occur many firms feel that they receive little support from their Brokers, or those administering the scheme through which they are insured.  Partly this problem arises because there is a perception amongst Brokers that Claims Handling is a cost which can be out of all proportion to the value of the policy.  Some years ago a major London Market Broker calculated that it cost the firm at least £100 every time that a claims file was presented to the market and that cost can only have increased in the intervening years.  Thus a complex claim involving a number of meetings over a period of months or years is, to the Broker, an uninviting prospect.  It is of little comfort to the insured facing an allegation of negligence, or breach of a regulatory duty, to find that his Broker is only going through the motions.

It is often reported that when a claim does occur the Underwriters will do anything to avoid accepting liability and the Broker does little to support the claim in order to maintain a good relationship with the Underwriter.  Sometimes this view is unjustified but all too often it is not.  Typically arguments involve the following elements:

• Underwriters refusing to accept the notification
• Late notification of a claim or potential claim.
• Errors in the proposal form currently allowing the policy to be voided for non disclosure

A major complication is that many Insureds, unfamiliar with the way that claims are handled, will misinterpret the Insurers’ actions as an attempt to avoid liability when in fact no such decision had been made.  This can become a “self fulfilling prophecy”.  We can assist in reassuring the Underwriters’ that the claim is being properly dealt with and try to prevent such misunderstandings damaging the Insured’s relationship with the Broker or the Insurer.

Generally we can help when there is a dispute with the Insurer or where the management of prior years’ claims has become complex or time consuming.  We would:

• provide an assessment of the strengths and weaknesses of the insurer’s position and suggest a way to resolve the matter
• assist in the management of the claims
• assist in the negotiation of disputed or contentious claims.

Currently there is a significant change taking place in Insurance Law, with two new insurance Acts.  The first, dealing with consumer insurance has been passed and the second, dealing with commercial Insurance, is currently before Parliament.  Both of these will have a significant impact on the remedies open to both Insurers and Insureds.