Institute of Certified Bookkeepers
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Some of your PI questions answered

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  • # 70324

Following on from ICB's Stepping out in 2011, Insurance Made Easy fielded many questions. Below are the most asked and the answers.

Q   Do my contractors or employees also need insurance?

A  You are automatically covered for any claims made against you due to the negligent act or omission of employees or contractors that you are directly responsible for. Given that even contractors providing BAS services need to registered , and to be registered they need to hold .professional indemnity insurance. In this scenario a claim would be made against you , our insured. The insurer would settle or defend any action against you. The insurer then may wish to persue the contractor for reimbursement often referred to in insurance policies as Subrogation

Therefore, it is highly recommended all contractors have their own insurance also.

Q   What happens if I retire,sell my business or cease trading?

A   The policy offered by Insurance Made Easy includes FREE three year run off cover. This means that if any claim is made against you in the three years for an act made during the period of insurance you will be covered up to your original policy limits. If you are not insured with Insurance Made Easy, you may have to purchase this cover at additional cost

Q   I’m insured elsewhere but if I change I’m worried if a claim is made against me for an act in the previous period of insurance I wont be covered?

A   You will be covered under what’s called retroactive cover for any circumstance that is unknown at the time you change insurers . Professional Indemnity insurance works on a claims made basis, this means that when you first become aware of a claim the insurer covering you at the time. Which leads directly to the next question

Q   When should I notify my insurance company of a situation that may lead to a claim?

A   To continue on from last question, you should notify any potential claims or circumstances at the time you think they might lead to claim .This is most important. especially if you change insurers ,the consequences of not doing so, may lead to both your old insurer and your new insurer denying cover

Q   Can I choose my own lawyers if a claim is made against me?

A   In most cases ,As the insurer will be paying for any legal expenses related to a claim they reserve the right to choose the legal representation in defending you or settling a claim against you. They often have relevant expertise inhouse or on their panel of preferred solicitors

Q   If a claim is made against me , will I be reimbursed for my time spent fixing accounts?

A    Usually, NO. It will often be alleged that the claim against you is for faulty workmanship , which rectification of such work is excluded. if it deemed that you must fix the problem. This is common in most classes of insurance. However any resultant damage caused to the client or other costs the clients incur such as getting external consultants in to fix the errors should be claimable against your policy .

Q    I’m worried if I do make a claim I will become uninsurable?

A    Whilst this is the $60 million question. In essence ,the insurer looks at a whole range of factors before they make a decision, some of these factors are

  • What was the claim about and how did it happen . Often $ amount of claim is ignored
  • What is the likelyhood of you having another claim in similar circumstances
  • Experience of you and your staff/contractors
  • Ongoing training of yourself and your staff/contractors
  • Member of ICB

Q   When should I notify my insurance company of a situation that may lead to a claim?

A    As we all get cranky clients . Usually most complaints are solved satisfactorily and everyone moves on. However if a client was to sack you because of a dispute , you have this uneasy feeling that it may lead to a claim down the track or you are aware your actions have caused your client financial harm. Then it is time to get your insurance broker involved. They will advise you the best cause of action

Q   You say I am covered for software installation, maintenance and use. What does this mean?

A    Whilst we cannot comment on other insurance providers(and we know many of them have restrictive clauses around these activities ) Your Insurance Made Easy/Chubb policy automatically includes cover for :-Installation,Set up,Configuration,Training & Use, Datafile management , Backup ,File Management location of all accounting and financial management software. Claims in this area are more than likely going to come from crashing a clients server ,deleting data or failing to ensure that backup procedures are operational 

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