It’s that time of year where we remind all members that their professional indemnity policies will soon be due for renewal.
All Society of Will Writers (SWW) members have an obligation to purchase professional indemnity cover, with a limit of indemnity of at least £2 million.
The SWW has its own official insurance scheme, which is exclusively available to members. It has been designed in collaboration with a leading UK insurer, specifically to meet the needs and cover the activities of will writers and estate planning practitioners.
The SWW insurance scheme has been running since 2010, supporting members when they need it most. There is no doubt that existence of our insurance scheme helps keep rates competitive as it gives us protection in numbers, which you may not get if you sought out insurance in isolation.
The important thing to remember is not all professional indemnity insurance policies are the same. There are many variations in cover that can apply and a policy may not be all that it seems at first glance.
Please find below our annual guidance to members of the most common differences found in professional indemnity policies.
- Each and every claim limit vs aggregate limit
The limit of indemnity can apply either to each and every claim or in the aggregate. Each and every claim means that each claim will benefit from the full limit of indemnity, whereas an aggregate limit is the maximum that an insurer will pay in any one period. Always look for an each and every claim limit to ensure that your insurance cannot be exhausted.
✔ The SWW insurance scheme’s professional indemnity policy is based on an each and every claim limit of indemnity.
- Costs inclusive limits vs cost in addition limits
The limit of indemnity can be stated to either include the costs of defending an action or give these in addition to the limit. We recommend that you look to obtain a policy which gives a cost in addition limit. Often the cost of defending a claim can actually be more than the damages awarded. Sometimes to offer a policy cheaper, an insurer will restrict the cover offered by only giving a costs inclusive limit of indemnity. Whilst on the surface these limits may seem the same, they will actually offer you a lower level of protection.
✔ The SWW insurance scheme’s professional indemnity policy is based on a costs in addition limit of indemnity.
- Excess applies to defence costs
Most policies will have a policy excess otherwise known as an insured’s contribution. In order to cut costs some insurers will apply the excess to the defence costs of a claim which means that should an allegation be made against you, you will be required to pay a proportion of those costs. Always look for a policy where the excess or insured’s contribution do not apply to defence costs.
✔ The SWW insurance scheme’s insured’s contribution does not apply to defence costs.
- Civil liability policy wordings vs errors and omissions (E&O)
The basis of the policy wording is very important and it is vital to understand the differences between an errors only wording and a civil liability wording. A civil liability wording not only covers errors and omissions, but also other civil liabilities such as libel and slander, loss of documents and dishonesty. In opposition to an errors and omissions wording, a civil liability wording is defined by its exclusion rather than its inclusions, meaning that if something is not excluded then generally it is deemed to be included.
We recommend that you always opt for a full civil liability wording and read the exclusions very carefully to make sure there are no surprises. Not all civil liability policies offer the full range of cover and sometimes it may seem that you are protected for a particular situation; however, when you check the exclusions section you could find it isn’t covered at all, or the protection is reduced significantly.
✔ The SWW insurance scheme provides a full civil liability wording.
- Loss of documents
Most professional indemnity insurance policies will contain this cover, but it is usually restricted to the loss of a company’s own documents and does not include documents belonging to others. Because the will writing profession involves the drafting and storage of documents that belong to others, cover in many policies is insufficient to cover the cost of reinstating the documents in the event of a loss. Always check to see if cover extends to other peoples’ documents that are entrusted to you.
✔ The SWW insurance scheme includes cover for the reinstatement of other peoples documents entrusted to SWW members.
- Claims notification
Insurance policies will always contain a clause which refers to the notification of claims. Because professional indemnity insurance is offered on a “claims made” basis, claims must be notified within the policy period and without delay. Failure to notify a claim may lead to an insurer declining to provide indemnity. Each insurer handles notification of claims differently.
Always look for a policy which allows a reasonable period of notification and be wary of any policy which stipulates a tight or strict time frame i.e. claims must be notified within 7 days.
✔ The SWW insurance scheme requires incidents to be notified “promptly” rather than stipulating a period of time in days.
- Retroactive cover
Professional indemnity insurance is underwritten on a “claims made” basis rather than a “claims occurring” basis. This means that a person must hold a valid insurance policy at the time when a claim or complaint is made, irrespective of when the allegedly incorrect advice was given or the document drafted.
Insurers will apply a retroactive date to a policy which stipulates how far back advice can have been given, or documents drafted in order for a claim to be valid under the policy.
For example, if a business commenced trading in January 2008 but did not buy professional indemnity insurance until January 2009, an insurer would most likely set a retroactive date of 1 January 2009. This means that if a claim occurs in March 2009 for advice that was given prior to the 1 January 2009, this would not be covered as it precedes the retroactive date of the policy.
✔ The SWW insurance scheme is offered with unlimited retroactive cover provided that a professional indemnity policy has been kept in force at all times.
- Run off cover
It is worth remembering that all members will at some time stop writing wills and undertaking estate planning activity and this could happen at any time due to an unforeseen factor such as ill health or other sudden change of circumstances.
Run off cover provides continuing protection for members who have ceased will writing activity but still have a potential liability for wills that they have drafted in the past, which can last for the lifetime of the will writer.
✔ The SWW insurance scheme offers lifetime protection for members who have ceased will writing activity.
The need for SWW members to demonstrate the highest professional standards has never been greater and as part of SWW’s continued commitment to quality, and in the interest of protecting members and the public alike, we will be auditing every member’s professional indemnity insurance cover throughout 2021.
For more details about the SWW Insurance Scheme, please email [email protected] or call 01482 388513.
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