Professional indemnity insurance: when claims are made

You’ve arranged professional indemnity (PI) insurance to protect you and your talking therapy business from daily risks. But in the event you need to make a claim, do you fully understand the criteria on which the claim would be assessed?

Conventional liability policies, such as employers and public liability, pay claims that relate to incidents of loss or damage during a typical 12 month period – the cover term. This type of policy is known as a ‘claims occurring’ policy.

PI policies are different. They’re written on a ‘claims made’ basis. This means payment will be made for a claim made during the cover term, regardless of when the incident – or alleged incident – took place.

Why is this important?

You may be subject to a claim or an allegation from a client relating to therapeutic services you delivered many years ago. Providing you have PI in place, depending on your retroactive date*, your claims made policy will cover this historic service to which the claim relates.

For example, a client who received counselling following the loss of a loved one five years ago was satisfied with the results of her programme at the time. Two years later, she claims the treatment exacerbated her grief and is now suffering from signs of Post Traumatic Stress Disorder. Something she feels is related to the therapy she received.

The therapy took place outside of the current policy period. Yet, because PI is written on a ‘claims made’ basis, the insurer will accept liability. The retroactive date on PI policies arranged by Oxygen is unlimited – covering all previous work and training. A breath of fresh air for all our customers.

What does this mean to therapists?

Regardless of the type of policy, they are all based on mutual duty and utmost good faith between the insurer and the insured. So when you’re arranging your PI for your therapy business, your insurer relies on the accuracy of the information you provide. You, the insured, must disclose any information that may influence how your policy is written.

You should notify your insurer immediately if you become aware of a claim or a circumstance that may lead to a claim, irrespective of your views on liability or the amount involved.

Under the Insurance Act 2015, there are various grades that insurers respond to someone failing to disclose all risks before arranging the policy. These grades depend on whether it was deliberate and reckless or whether the insurer would have entered into the insurance contract on different terms if full disclosure had been made.

Knowing when to notify your insurer of a potential claim can be challenging. It may not be easy to differentiate between the everyday demands of an overbearing and demanding client simply seeking quicker results on the one hand and an emergent compensation claim on the other. It may be that under the insurance policy conditions, notification should have been made earlier. In this case, special policy conditions may state that the specific incident would be covered, providing the insurer is satisfied that the failure to make earlier disclosure was innocent, there was no intent to deceive and that no prejudice had accrued to the insurers in the meantime.

PI policy terms and conditions are strict when it comes to the time allowed to notify your insurer. An innocent non-disclosure, where you breach a policy condition, puts your insurance protection at risk. Not complying with these rules may leave you uninsured.

It’s your responsibility to review your policy terms and conditions. Ensure they’re fully complied with when you submit a claim or potential claim arises to avoid issues with policy coverage.

As a general rule, if you have to ask yourself whether a matter should be reported or not, then it probably should be.

^{*A retroactive date is a date from which your PI insurance policy has been in place – even if you changed insurance provider during this time – or a date in the past from which you are covered. Your insurance does not cover any claims that arise from events prior to this date.}