Introduction What is Insurance for Errors and Omissions ?

1. Insurance for Errors and Omissions in PracticeA Presentation by Emson Corporate Services PLCApril 1999

2. IntroductionWhat is Insurance for Errors and Omissions ? What is Covered ? The Insurance provides indemnity for compensation and /or damages that you may become legally liable to pay………. How would a Claim Arise ? ……….arising from the exercise and conduct of your business In effect, “Professional Indemnity” is the insurance against mis-advice

3. Why have the Cover ? “The Consequences of mis-advice to a business can be extensive” Financial - Mis-advice, error, omission or negligence can cause significant financial loss to our business. Example - Failure of a Company to produce work to a set specification, resulting in financial loss to a Client, can lead their Client to make a claim against the Company for that loss. This can impose significant financial burden on the Company if they are not insured.

4. Why is Professional Indemnity Insurance different to other covers ? “Claims-Made” Basis - The cover operates on the basis that indemnity is provided should any circumstance or incident of which the insured is aware, become a claim at any time in the future, provided that…………. ….the incident was notified to insurers at the very first available opportunity, ie when you first became aware of the situation, or its potential

5. Why is Professional Indemnity Insurance different to other covers ? Indemnifying Underwriter - The reason for this, is that any claim brought under Professional Indemnity insurance will be paid for by the actual Underwriter at the time when the claim is made. This is as opposed to the claim being paid by the Underwriter at the time when the original circumstance was notified. This is unlike a motor claim where a claim arising from a previous period of insurance, would be met by the Insurer who was underwriting the risk at the time.

6. How do we recognise a “notifiable incident” ? Professional Indemnity claims manifest themselves in many ways. Unfortunately, there is no definitive answer as to those types of incidents that should be notified. Bearing in mind the need to comply with policy conditions every incident of compliant, dissatisfaction or dispute should be referred to Underwriters We cannot be sure at the time an incident becomes known how it will develop in the future Therefore it must be notified at the time when we become first aware

7. “The Problem of Notification” Professional Indemnity “claims” are very different to other insurance claims Example - The origins of a Property Burglary claim, for example, and the results are self-evident : the causes of the claim are readily identifiable. The origins of PI claims are not always immediately apparent, and therefore we may not notify the incident, at the very first available opportunity, for the following reasons………………

8. A) “We Don’t think It’s Important” Problem - One of the major reasons why PI claims are not notified to Underwriters at the critical time, is because at the time of the first complaint, or refusal to pay, we do not identify the potential of the situation. Very often incidents that appear to be no more than a complaint, can escalate into substantial claims in subsequent months or years. Solution - At this time it will be too late for Underwriters to indemnify, because they were not informed of the incident when its potential became known - this is a breach of policy conditions All incidents as a matter of course should notified

9. B) “We think the Compliant is Unjustified” Problem - Another major cause of non-notification is that in the event of a complaint about the professional advice we have given, we may feel that the complaint is unjustified - so we do not notify it. Solution - Underwriters are not just there to pay claims, they can also assist in the defence of any claim you receive, if it is your opinion that any claim is unjustified. Even if you feel this is the case, the eventual settlement of the claim may not obsolve you of all liability, and therefore again we must notify Insurers of the potential situation.

10. C) You were not the Only PartyInvolved in the Contract Problem - In certain cases, more than one company can be involved in a specific contract, and therefore in the event of a complaint against the Company, you may not feel that you are responsible for a particular error or omission. Solution - Again, your view of the responsibility for an error may not be shared by an Arbitrator, or indeed the other Companies involved with the work, during which the alleged error took place. Underwriters need to be aware of the potential of the situation, such that in the event of it becoming subsequently clear that some, or all, of the liability does rest with you, they are able to indemnify you

11. D) “We can Settle the Claim Ourselves” Problem - In the event of a claim being made against a Company, if there is a clear costing attached to the claim, and you feel that you were at fault, there may be a tendency to wish to settle the claim with the third party yourself, particularly if the quantum is small. Solution - The key here is the basis on which settlement is agreed. It must be clear from the legal perspective that any settlement offered is full and final. Bearing in mind the aforementioned need to comply with policy conditions, all incidents should be notified to Underwriters, and therefore they will be able to advise you accordingly.

12. E) “We do not want to admit a mistake” Problem : One of the most significant, and sensitive, reasons for not notifying incidents at the very first opportunity, is that we do not wish to acknowledge making a mistake In a professional business, there is a fear of admitting error Solution : If an incident is not notified when its potential becomes apparent, then it will not be indemnified by insurance at a later date. Therefore the financial burden will have to be borne by the Company and the initial error is compounded Everybody makes mistakes at some time !

13. Summary The main reasons as to why we do not notify incidents at the very first available opportunity are : * The incident was unimportant * The complaint is unjustified * We were not the only party involved * We can settle the claim ourselves * We do not want to admit a mistake Common Factor - We have to take notice of the potentialof any given situation and notify in every case

14. We have identified this “potential” fora claim……….how do we notify ? Once we have identified the potential of a situation, what do we do next, and what are our on-going responsibilities in relation to the incident we have notified ? * Complete Notification Form * E-Mail and Simultaneous Transmission * On-Going Responsibilities

16. Electronic Notification Accessing the Notification Form - The most convenient method of notifying us of incidents is to complete the The Notification form on our web site. The form provides a structured format for you to notify us of any incident that has the potential to become a claim. Form Completion - The form contains all the relevant questions to be answered, including : * Details of Work Undertaken * Date you first became aware of problem * What advice was given, and when

17. E-Mail Transmission and Printing Functions E-Mail Transmission - At the foot of the form is a “Submit” button to send the completed form by E-mail to both Emsons and a designated point of contact at your Firm if required. Printing - As for any web site screen, “Ctrl + P” will enable you to print your form by activating the print dialogue box

18. Notification Summary A)Access claim form on Emson’s Web site B)Complete form and Transmit by E-Mail C)Use Manual Notification if Required

19. What Happens Now ? Your Responsibility as a Policyholder - In order to comply with policy terms and conditions, it is paramount that any verbal or written advice you receive in relation to notified incidents is in turn relayed to Underwriters. In all cases their authority should be sought first before corresponding with Third Parties or Claimants Underwriters Role - Underwriters will continue to monitor the notification and offer advice where appropriate as the claim progresses. Should any formal claim be presented, they will then deal with this as per normal policy terms and conditions.

20. Insurance for errors and omissions is conceptually very different to other insurances. Claims that relate to work conducted in a previous insurance year are paid by the Insurer at the time the claim is made. It is therefore critical to ensure that the policy designed to protect you is allowed to operate………… “…………by notifying incidents at the very first available opportunity.” . Conclusion

21. We must recognise the potential of any situation, and notify Underwriters as soon as possible. Notification is made easy by the use of structured forms and e-mail transmission, via Emsons web site. If the policy cannot operate because of non-disclosure, the financial burden of a claim may fall on your Firm In any event, it is always better in the long run to notify an incident - it does not necessarily mean that a claim will arise….

22. ……….and that you as an employee have taken every step to ensure compliance with your Firm’s Insurance policy conditions.

23. Emson Corporate Services PLC “Providing Professional Insurance Advice to Business and Individuals for over Sixty Years” Emsons are available to discuss any aspect of Professional Indemnity cover. Please contact Graham Davies or Nick Smallcorn at : Emson Corporate Services Plc, Radnor House, London, SW16 4DF Telephone : 0181 679 7115 Fax : 0181 679 5445 E-Mail : insurance@emson.com Thank you