Insurance is a major cost for most businesses and Professional Liability Insurance can be a particular burden for any business that provides a service or offers advice.

Unusually for most commercial contracts the true quality of the purchase, it’s fitness for purpose, can only really be assessed when the policy is called upon to perform.  If the policy does not perform then it can be too late to do anything about it.  There are, however, a number of steps that can be taken, both before and after a claim, which can resolve the problem.

Proper management of the Insurance portfolio principally breaks down into four parts:

The Placement

Whether it is a new policy or the renewal of the old policy it is important to realize that each renewal is the negotiation of a new contract and that any presentation made to the insurer must be fair each time.  By ensuring that the presentation to the insurer is good enough many problems in the future can be avoided.  Declining a claim or threatening to void a policy because some piece of information was not provided at renewal is a common problem and the legal position is strongly favourable to the insurer.

It is also important that the insured is comfortable with their broker.  The selection of a broker will not only depend on the solutions they may provide but will also their size and whether the insured feels they can work with them.

The Policy

There is an obligation on the insured to check the policy document and make sure that they comply with its terms and conditions.  Making sure that the policy has been received and ensuring that the obligations that have been assumed under it by the insured are understood and can be complied with is an essential step in proper management of any insurance contract.

Notification of a Claim

In professional liability policies there is a requirement not only to notify a claim but to notify a “circumstance”.  While “claims” are defined “circumstances” are not.  Proper notification of circumstances both during currency and at renewal is essential if the insured expects their claim to be paid.

Claims Handling

Once a claim has been notified to an insurer it is important to understand the process.  Normal procedures can be misinterpreted and this can cause a problem.  For example: insurers will frequently instruct a solicitor to investigate a claim.  This does not mean that they are immediately planning to reject the claim but that they are doing their “due diligence” on it.  Greeting the solicitor with hostility in such circumstances is a mistake.

All these factors need to be addressed correctly and by having an experienced insurance practitioner dealing with them the chances of the policy responding as it should are greatly improved.

This process can be complex and time consuming, as a result resources that should be dedicated to running the business are diverted to dealing with the claim.  Frequently the diversion of management time can be so great that it can threaten the survival of the firm.