PI/PL Insurance - how long would you keep it on

[lawnmower]

I don't know if anyone else has had this situation, but suppose you've had PI/PL insurance while working through a limited company, and it's not relevant anymore because you either now work through an umbrella company (that provide it as part of the package) or maybe you 've gone permanent.

So do you stop the insurance right away or keep it on via some kind of run off cover to provide coverage for work performed in the past.

I think it'd be a bit over the top do to that for a very long period, particularly if the last contract it applied to was eg 5 years ago.

I just wondered if anyone else had thought about this.

[malvolio]

It's given on a claims-made basis, not when the cause of the claim occurred. So you need it as long as there is a risk that an ex-client will make a claim.

[Glencky]

The fact the OP knows it's on a claims-made basis is clearly the reason for the post, isn't.

To the OP - it's a judgement, isn't it? I operated inside IR35 even before April albeit via my Limited. So in April, sticking with the same client (for a rate uplift) and going via Umbrella wasn't too big a deal. I've kept MyCo open for now because in my line of work, it's feasible I'll get an outside contract elsewhere. Whilst MyCo is open, I'm still paying for the insurance cover. Because of the accounting implications of operating via a Limited inside, my warchest is mostly outside the company, taken in salary. I have limited reserves in the company itself. That means the clock is to some extent ticking - I won't keep MyCo open forever. I decided I'll review things once this contract is over and I test the market.

In short, though - I'd keep the indemnity cover for at least a year after last contract - unless I'm shutting down the company sooner, of course, in which case I'd keep it until the company closes.

I'll be interested to see others' views on this. It really depends what you're doing but I suspect for most of us, the real-world risk of being sued by a former client is very low indeed.

[northernladuk]

For me I'd do one full year after the current year has ended. i.e. just pay once more.

[ladymuck]

Have a look into run off cover. I thought at first it was a one-off payment but still requires annual payment, not sure how a wound up business pays for that if you don't find an insurer who will let you buy several years' of cover up front.

https://www.professionalindemnity.co...nsure/run_off/

https://www.marshcommercial.co.uk/ar...run-insurance/

[GhostofTarbera]

Since no one ever has claimed against this for a contractor ever (yes scare stories from insurance providers with no backup)

immediately is the answer

[malvolio]

Since no one ever has claimed against this for a contractor ever (yes scare stories from insurance providers with no backup)

immediately is the answer

Wrong, but hey...

[Paralytic]

Wrong, but hey...

Whilst i hate to agree with GoT, I'd personally make a risk-based judgement and let it lapse, but that's because i simply cannot see how any previous client could come after me for any work i've done. Yes, I might be wrong, but that's what risk based assessments take into account.

I would be interested whether anyone reading this knows (not has heard of) anyone who has had to claim on their Ltd PI/PL insurances.

[ladymuck]

Whilst i hate to agree with GoT, I'd personally make a risk-based judgement and let it lapse, but that's because i simply cannot see how any previous client could come after me for any work i've done. Yes, I might be wrong, but that's what risk based assessments take into account.

I would be interested whether anyone reading this knows (not has heard of) anyone who has had to claim on their Ltd PI/PL insurances.

Your average BoS contractor is never going to see a claim.

I think there may be certain industries (maybe nuclear, oil & gas) where a design you do might have a flaw in it that's discovered many years later but you'd still expect to have several layers of approval before any design got close to being realised, giving you some protection. I guess there's a chance that a coder could inadvertently produce something that could be exploited at a later date but, again, procedures are in place in most organisations to check code before its released.

However, if either of those scenarios ever came knocking, you'd want some cover to at least cover the costs of batting it back into their court.

My only other query is how can anyone sue a company that doesn't exist without first proving that the director was remiss in their duties?

[malvolio]

Whilst i hate to agree with GoT, I'd personally make a risk-based judgement and let it lapse, but that's because i simply cannot see how any previous client could come after me for any work i've done. Yes, I might be wrong, but that's what risk based assessments take into account.

I would be interested whether anyone reading this knows (not has heard of) anyone who has had to claim on their Ltd PI/PL insurances.

There was a one sometime ago where the contractor was supposed to create a reliable long-term backup regime for the client's data. When the disaster happened and they needed to use the backups in anger, they discovered that while he had secured all the data, he hadn't secured the schemas that described that data to the database(s). He was sued for the costs of the recovery effort and to correct his original error. Randell Dorling and QDOS have both mentioned other cases.

It is unlikely for the average coder writing non-critical business software, for example, (about 98% of them) or people in routine BaU operations. If you are into safety critical systems, for example, or reorganising departments or anything else sitting on the business's critical path, the risk is real. That's why it's in the contract.