Professional indemnity – what is run-off insurance?

Professional indemnity insurance protects you against claims of negligence related to an act, error or omission as the result of a client receiving professional advice or services from your business.

Professional indemnity insurance covers are known as ‘claims made’, which means the indemnity applies to claims that:

• are received by the insured;
• and notified to the insurer during the policy period.

The insurance protection applies irrespective of when the work was performed.

There is a potential risk exposure for claims against an insured after a project is finished, or after you cease trading or close the business. If a claim for negligence is received at a time in the future and there is no insurance policy in place there would be no protection for the insured. This is where a ‘run-off’ insurance policy can prove to be very valuable.

Run off insurance cover can be purchased yearly, or a multi-year policy coverage can be considered to fulfil the contractual time period and provide protection against a future allegation of negligence.

How long should run off cover last for?

It is up to you and your business situation when deciding how long your run-off cover should last for. It’s important to take different elements into consideration, such as:

• the type of profession;
• the risk associated with prior work performed;
• any contractual requirements to maintain insurance coverage;
• the risk of an allegation of negligence against you after you have ceased operating.

Most insurers can offer professional indemnity run-off cover for a period of up to 7 years.

Claim example

An allegation of negligence was received by a Geotechnical Engineer who completed a report several years prior for a potential mine site. There was a mine collapse after significant rainfall, which caused injury to several miners.

The Geotechnical Engineer retired two years after the work was completed. The Geotechnical Engineer purchased a yearly run off cover and was protected by their insurance when the allegation of negligence was received, which was an allegation of causing a multi-million dollar loss.  The insurance protection also included legal representation to support the insured through the investigation process.

Learn more

Austbrokers Countrywide is the endorsed Insurance Broker to the AusIMM and has established an exclusive Professional Indemnity and Public Liability Insurance facility for AusIMM members. You can find out more here.