Does your PII cover your needs?

Lothbury UK Ltd administers the Ciarb Professional Indemnity Insurance scheme.

Nathan Brookfield, broker at Lothbury UK Ltd, provides insight on the key considerations for members when purchasing Professional Indemnity (PI) Insurance.

The Ciarb PI scheme*, provided by Lothbury UK Ltd, offers Any One Claim limits, with Costs in Addition on a Civil Liability wording backed by an A-listed insurer. While Ciarb members and dispute resolution professionals generally have not been impacted by the higher rates of insurance and premiums in the PI market to the same extent as other professionals, it is more challenging than ever for professionals to find the right cover at the right price.

Furthermore, a reasonably priced insurance policy can quickly become irrelevant if it does not respond to a potential claim. Below we will discuss some of the key considerations in ensuring your PI insurance cover is appropriate.

Statutory protection for arbitrators – check immunity is in force
Ciarb members will be well versed in s29 of the Arbitration Act 1996 (the Act), which grants immunity to Arbitrators for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the act or omission is shown to have been in bad faith.

Where Ciarb members sit as mediators or adjudicators and the above immunity is not in force, there is a clear exposure. Even where Ciarb members sit only as arbitrators, it is important to note that regardless of the above statutory provision, there is still significant potential for defense costs in relation to allegations against them during the discharge of their function. There is also the potential loss of fees in situations such as an application to remove the individual as an arbitrator under the Act.

Pay close attention to the policy terms
As with any insurance policy, it is important when reviewing quotes for PI insurance to pay close attention to the terms of the policy. For example, ‘Civil Liability’ wording provides wider cover when compared to the usual ‘negligence’/’errors and omissions’ wording.

Members need also to pay close attention to endorsements on the policy schedule, which modify the wording. A common example is the Cyber & Data Law exclusion, which is now applied market-wide, leading most firms to purchase a Cyber Insurance product separate to their PI insurance.

Most PI policies in the current market are written on an Aggregate basis (as opposed to Any One Claim), meaning that the limit of indemnity represents the totality of the insurer’s potential monetary liability during a policy period. Furthermore, policies are usually Cost Inclusive (rather than Costs in Addition), meaning that any defence costs during the period count toward the limit of indemnity.

Consider the Territorial Limits & Jurisdiction of your policy
Territorial Limits are the physical boundaries within which work by the insured party is covered. Jurisdiction refers to the countries in which the policy will respond to legal action against the policyholder.

Generally, the Territory will mirror the Jurisdiction of a policy. This will usually be ‘United Kingdom Only’ or ‘Worldwide excluding the USA and Canada’ for UK written business.

Members may find themselves sitting on hearings where the location of the matter causing dispute, the parties’ domicile, the location of the hearing, and the applicable law are all different. This demonstrates the importance not only of completing the proposal form as diligently as possible but also of considering the Territorial Limits & Jurisdiction of your PI policy before accepting appointments.

Solicitors professional indemnity (PI) insurance does not always cover dispute resolution
Many individuals who sit on arbitrations and other forms of private dispute resolution are also practising legal professionals. We have encountered the inaccurate presumption that Partners, or employees of Solicitor firms will be covered under the firms’ PI for their activities as dispute resolution professionals.

Solicitors PI is a specialist product. Whilst it is possible that this additional exposure could be picked up by such policies, this would only be the case if the activity was clearly specified in the policy wording or by specific endorsement on a policy schedule. We would always recommend reviewing your policy documents and discussing with your broker before making any presumptions in this respect.

Likewise, PI policies specifically for dispute resolution activities are likely to include an exclusion for the provision of reserved legal activities.

Ensure inclusion of all roles you cover in dispute resolution (valuations, expert witness, regulatory boards, etc.)
Annual completion of proposal forms can be frustrating for busy professionals, particularly where little has changed. However, the importance of diligence and full disclosure on these documents cannot be stressed enough. The signed proposal document forms part of the insurance contract and is the basis on which the underwriter agrees to accept risk.

Where members sit on various types of dispute resolution panels, this should be made clear. Insurers may have grounds to refuse an otherwise valid claim if it is founded in activities not disclosed to them at the inception of the policy.

Furthermore, members should be conscious of additional related activities they undertake, such as valuations, expert witness, training, and regulatory boards. These will only be covered under policies of this nature if it is made clear on the proposal form and accepted by underwriters and endorsed accordingly. This may be a detail worth checking in your current policy terms and conditions.

Lothbury UK is happy to help on all insurance-related matters for Ciarb members and work with a select panel of A-Rated insurers who have the expertise and understanding of dispute resolution.

Email: Ciarb@lothburyuk.com

*The Chartered Institute of Arbitrators is an appointed representative of Lothbury UK Ltd which is authorised and regulated by the Financial Conduct Authority.