Reply to: Cancelling PI Insurance

[Lance]

That's a fairly sweeping statement.

Some clients want e.g. confidentiality agreements to be agreed by the person and not the company. *

PI covering the director personally might be useful in those cases... maybe?

Tbh, I tend to be quite cynical about the need for, and value of, any of these stock type insurances.

* It's tricky, and annoying, because usually such documents are usually developed in-house, evolve to outreach their stated purpose, presented only after contract start, and you lack the same protections as an employee would wrt unreasonable clauses.

You say it’s sweeping but the one example you provide is irrelevant. PI is not going to cover you for breaching a confidentiality clause.

[Contreras]

About the only time a director is going to be held responsible is for corporate man slaughter or similar.

That's a fairly sweeping statement.

Some clients want e.g. confidentiality agreements to be agreed by the person and not the company. *

PI covering the director personally might be useful in those cases... maybe?

Tbh, I tend to be quite cynical about the need for, and value of, any of these stock type insurances.

* It's tricky, and annoying, because usually such documents are usually developed in-house, evolve to outreach their stated purpose, presented only after contract start, and you lack the same protections as an employee would wrt unreasonable clauses.

[Lance]

Why keep the company open? You can easily create a new one when you need it.

I kept mine open for a few months in the expectation of work that didn't materialise. Now I'm closing it as I'm in an umbrella.

Still figuring out what to do about PI insurance though.

Does it depend on the assets you have in the company when it closes? If there are no assets then a claim against the company won't have anything to claim on.

Maybe if you were under a contract requiring PI for x years after completion, then a claim would be a valid reason to apply to the court to have the company reinstated. Would this happen in practice though?

If the company is closed how can it pay the premium? It can’t.
So how exactly can it have PI?
The only way that PI can still work after company closure is if the individual has PI. For an IT company that is not the case.

Maybe for a profession like lawyering, accountancy or similar the PI would be for the individual. On that basis I’d ignore any advise that is based on those examples.

About the only time a director is going to be held responsible is for corporate man slaughter or similar. And in those cases PL or EL is not valid anyway.

IANAL

[SueEllen]

This is very interesting but is on a website trying to sell insurance. Surely the very nature of a limited company is that the liability rests with the company rather than individual employees, even if directors?

If that is true, my concern is that a company can be brought back from the dead through a court order for restoration.

Strike off, dissolution and restoration

It depends how your contracts are written.

It was explained to me by the lawyer that reviewed my contract, where I had to keep PI for 6 years, that if I closed my company that the would come after the directors individually. The clause was like that because the company had suffered data loss.

The lawyer had actually managed to get them to tweak it as he pointed out that the company had the insurance not me. (I was also strongly advised not to deal with anyone's personal data while on the contract.)

[50h9j]

Why keep the company open? You can easily create a new one when you need it.

I kept mine open for a few months in the expectation of work that didn't materialise. Now I'm closing it as I'm in an umbrella.

Still figuring out what to do about PI insurance though.

Does it depend on the assets you have in the company when it closes? If there are no assets then a claim against the company won't have anything to claim on.

Maybe if you were under a contract requiring PI for x years after completion, then a claim would be a valid reason to apply to the court to have the company reinstated. Would this happen in practice though?

[50h9j]

Unaccustomed as I am to posting in such hallowed ground, read this about Run Off Cover of PI insurance.

Guide To Run Off Cover | Professionalindemnity.co.uk

This is very interesting but is on a website trying to sell insurance. Surely the very nature of a limited company is that the liability rests with the company rather than individual employees, even if directors?

If that is true, my concern is that a company can be brought back from the dead through a court order for restoration.

Strike off, dissolution and restoration

[gaz777]

Thanks Ladymuck

I just need a bit more clarity on the risk though.
If a client or hmrc goes after me, is it just the money in the company they can get? In that case it's probably not worth their while.
If they can go after me personally, then do I need to make sure the PI policy covers directors and ex-employees? Do I need to check how many years back it covers?

[ladymuck]

I'd keep the professional indemnity, just in case you've upset a client, and if you had any tax investigation insurance I'd keep that ticking over too. While the company is still trading (albeit not doing much) it's still a potential target for HMRC.

[gaz777]

Hi,

I'm in a similar situation. I've been IT contracting via my limited company for about 6 years. About a month ago I started a new contract via umbrella company due to IR35.

My plan is to keep the company going with minimal outgoings for a few years. After that, I'll have an idea of how the market is with ltd co contractors, and if it's worth keeping or liquidating.
Most of the money left is for corporation tax due. After that there will just be a few £1000s in the bank account.

My insurance is due for renewal next week, but what do I actually need?
- Employers Liability? I'm now employed by an umbrella, so is it relevant?
- Public Liability? I'm not doing anything via the company that could injure someone or result in a claim am I?
- Professional Indemnity? This one I'm not sure about.

I see people here recommend keeping PI insurance for a few years, but what are the risks and worst case scenario?
I know it's only a few hundred quid, but there's no point paying for a service that's of little or no benefit.
As above, there won't be much money left in the business. Not brilliant, but not the end of the world if it's lost.
Can the claim go against me personally as a director and former employee?
I've not re-read all my past contracts recently, but don't remember a requirement to keep PI for following years. Even if there was, could it be enforced?

I do have a separate Qdos IR35 policy with 6 months until renewal. Is that something I should consider renewing in future too?

Thanks

[SueEllen]

What do your contracts state? Some explicitly request that you keep your insurance for at least 3 years after contract end (the highest I've seen).

I had one that demanded 6 years. The last one had a 2 year period.

[DoctorStrangelove]

Nice find... You should post more..


That means more chance you'll slip up at some point and I'll 'Ave ya!! Raawwrrrr.

I don't post in the professional forums unless I know what I'm posting about.

I've posted that PI stuff several times.

What brought it to my attention was the unfortunate surveyor who missed a bulging wall in a house purchase and thought he was covered by the estate agency's PI.

The agency then went bust, presumably without the runoff thing.

The surveyor got sued and lost, £40k IIRC.

Hence the above.

What do your contracts state? Some explicitly request that you keep your insurance for at least 3 years after contract end (the highest I've seen).

The applicable limitation period in most professional negligence cases is six years from the date of the negligence. ...

If you are considering bringing a negligence claim against a professional, you should always act as swiftly as possible and seek legal advice on the relevant time limits for bringing a claim

One would suppose they know wot they're talking about.

Hence, one would also suppose, the duration of runoff being six (6) years.

[zonkkk]

Hello everyone

After 10 years working as a contractor via PSC, I would like to cancel Professional Indemnity cover for my limited company. I've learnt that after the cancellation the Insurer wouldn't honor claims relating to periods when my cover was active. Is this the standard practice? Seems unreasonable to me.

What is your opinion, how long should I keep up the "runoff" payments, given relatively low risk profile? Thank you in advance for your input.

What do your contracts state? Some explicitly request that you keep your insurance for at least 3 years after contract end (the highest I've seen).

[northernladuk]

Unaccustomed as I am to posting in such hallowed ground, read this about Run Off Cover of PI insurance.

Guide To Run Off Cover | Professionalindemnity.co.uk

Nice find... You should post more..


That means more chance you'll slip up at some point and I'll 'Ave ya!! Raawwrrrr.

[DoctorStrangelove]

Unaccustomed as I am to posting in such hallowed ground, read this about Run Off Cover of PI insurance.

Guide To Run Off Cover | Professionalindemnity.co.uk

Six years is the period many professional bodies require their members to carry run off PI for

[zonkkk]

Hello everyone

After 10 years working as a contractor via PSC, I would like to cancel Professional Indemnity cover for my limited company. I've learnt that after the cancellation the Insurer wouldn't honor claims relating to periods when my cover was active. Is this the standard practice? Seems unreasonable to me.

What is your opinion, how long should I keep up the "runoff" payments, given relatively low risk profile? Thank you in advance for your input.

It depends on what your contracts say as well.
My last contract demanded that the company keeps the indemnity cover for at least 3 years after the contract finishes.