Insuring your practice
Gavin: Recently, the TPD reminded agents that their Professional Indemnity Insurance is required to have retroactive cover. We though we would share some of the differences between obtains a Management Liability policy instead of, or in addition to, a PI policy for your practice.
PROFESSIONAL INDEMNITY versus MANAGEMENT LIABILITY
Professional Indemnity (PI) Insurance provides coverage for claims arising from the financial loss, injury or damage suffered due to the failure of a professional to exercise the required level of skill or expertise in their professional field.
A PI policy will often cover the legal costs and expenses incurred in the defence of a valid claim.
Some claims examples include:
- Insured (i.e., the professional) established a superannuation scheme but with the number of trustees.
- Claim arising out of the imposition of the ATO general interest charge (GIC) due to an error in calculating a specific PAYG instalment.
- Insured misrepresented the ability of certain parties to repay a mortgage arising in a claim from the lender.
Management Liability (ML) Insurance protects both the individual and the company in relation to exposures associated with managing and running a company. It protects the financial well-being of a company along with the personal wealth of its directors and officers.
Also, an ML policy will often cover the legal costs and expenses incurred in the defence of a valid claim.
It should be noted that a typical ML policy excludes professional indemnity claims.
Some claims examples include:
- Employees bringing claims for wrongful termination of employment, demotion or refusal to promote.
- Directors being prosecuted for breaches of the Corporations Law.
- Company being fined for a breach of OH&S legislation.
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