Continuous Insurance Cover. Or not.

**DeludedKitten** · 20 June 2018, 08:00

If your previous clients spot something and come after you when you are between contracts, what will you do?

**unixman** · 20 June 2018, 08:08

That is the question in a nut shell. Would the fact that I was covered when the incident took place not cover it ?

**northernladuk** · 20 June 2018, 08:09

Originally posted by DeludedKitten View Post

If your previous clients spot something and come after you when you are between contracts, what will you do?

WDKS....And the fact once you've paid cancellation fees or its been pro-rata'd I'd imagine it's cheaper to keep it running. Surely you can see the insurance company's won't be overly keen with your idea.

**northernladuk** · 20 June 2018, 08:13

I think a read of the small print of your insurance will give you your answer.. A quick google comes up with this.

https://www.markeluk.com/articles/sh...risky-business

The problem is that by cancelling your professional indemnity insurance policy, you're leaving your business exposed to claims from the date you cancel it onwards. Professional indemnity is arranged on what's known as a 'claims made' basis, which effectively means that your policy needs to be in force both when the claim is brought against you and when you undertook the work which the claim relates to.

To give an example; assume an IT contractor works on a contract that runs from January until August. The project finishes, everyone's happy and the IT contractor cancels their professional indemnity insurance policy in September. However, a significant flaw in the IT system's architecture comes to light in October, and the client brings a claim for thousands of pounds against the IT contractor.

As the contractor decided to cancel their policy in September, they wouldn't be covered for any claims made after that date; regardless of the fact the policy was in force during the time they undertook the alleged negligent work. So in this instance, they are without cover and would have to pay the costs of the claim out of their own pocket.

A couple of minutes more on google finds this...

https://www.hiscox.co.uk/business-insurance/faq

Some insurance policies, such as professional indemnity insurance, are provided on a “claims made” basis. This means that the policy needs to remain active for a claim to be covered. If you choose to cancel these insurances, and later need to make a claim, that claim will not be covered. If you are no longer trading, and would like to continue your cover in case a claim arises in the future, we have two options which can continue to cover your historical work.
1Hibernation: if you are between contracts, hibernation allows you to continue with your insurance policy at a reduced premium, which gives you peace of mind that you will continue to be insured for past work. Once you start a new contract let us know and we will bring your policy out of hibernation to cover your new work as well.
2Run-off: if you are retiring or have finished trading and your policy operates on a claims made basis*, you can put it into ‘run-off’, which allows you to stay covered for work you have already done if anything comes to light later on. Some professions, such as accountants, are required to have this for a certain number of years after they have finished trading.

Glad to see you are doing your homework when considering your business's responsibilities as usual.

**unixman** · 20 June 2018, 08:14

No cancellation or cancellation fees. As I said in the original question, this is about your cover naturally expiring (ie. comes up for renewal and you do not renew).

The examples quoted by NLUK seem to echo what I have read (on the websites of other companies that sell insurance), ie that your insurance must cover the time a claim is made, not just the time that the incident took place. To be blunt, I find this hard to believe. I suspect that your insurance, active at the time of the incident, would cover it. Sources of the contrary view all seem traceable to insurance vendors.

**northernladuk** · 20 June 2018, 08:22

Or if you are with QDOS

https://www.qdoscontractor.com/cancelling-your-policy

How the policy operates

Professional Indemnity Insurance operates on a ‘claims made’ basis. This means that the policy needs to be in force at the time a claim is made, for example when negligence proceedings are brought against the insured. If the policy is cancelled or allowed to expire and a claim is then brought, the policy will not react, irrespective of if the claim relates to services provided when the insured was on cover. The policyholder should consider keeping the policy in force continually until they are no longer exposed to claims.

**unixman** · 20 June 2018, 08:31

Interesting small print from QDOS, keeping in mind that they are another insurance vendor.

Can anybody on here from QDOS or elsewhere quote a case where this coverage failure was recognized in a legal judgement?

**northernladuk** · 20 June 2018, 08:35

Originally posted by unixman View Post

Interesting small print from QDOS, keeping in mind that they are another insurance vendor.

Can anybody on here from QDOS or elsewhere quote a case where this coverage failure was recognized in a legal judgement?

Have you asked QDOS?

I'd say none seems a majority of contracts stipulates PI and I've kept it going as advised ergo no failures.

The question you should be asking is how many PI claims have been brought. They you can start assessing the risk of not having PI for a portion of the year. I'd imagine it's so small it's nearly negligible but is that an acceptable risk over a couple of quid saving and the hassle of starting and cancelling your insurance because you are a tulip contractor.

Why are you getting pissy over what might amount to double figure savings a year?

I'd spend more time concentrating on getting end to end gigs rather than saving £20 on you PI insurance. HTH

**unixman** · 20 June 2018, 08:44

Once again: my question is not about cancellation.

Once again: insurance vendors like QDOS are not impartial.

Continuous Insurance Cover. Or not.