PI Insurance mitigation costs cover

Picture this:

1. You get a lawyer’s letter:
   You are a professional services business AND You receive a lawyer’s letter and you seek to claim on your PI insurance.

2. Insurer says no ‘Claim’
   Your broker sends the lawyer’s letter to the insurer and the insurer says - No CLAIM! and you should more or less… act as a prudent uninsured.

3. Why no ‘Claim’?
   You say: What do you mean - no claim! I’ve got a letter and I need to incur legal costs, investigating, responding and basically defending this.

4. Lawyer’s letter without a demand for money
   Lets say you are an engineer (but this could apply to any professional) and the letter says something like you are liable without demanding an amount. THIS is not uncommon!

BIG LAW FIRM LETTER HEAD
Dear Director

We act for Blah & Blah Pty Ltd (“Blah Blah”).

We refer to the Blah Project and as you know the structure collapsed causing loss and damage to the owner.

Our client alleges that the structural steel has…XXX fill in the blanks XXX (various allegations and requests for information and documents).

We are concerned and enclose expert report of Blah Expert Pty Ltd.

We demand the following documents and answers to questions…

5. Your PI Policy
   Lets say your PI policy definition of ‘Claim’ says something like: “Claim means: “(a) a written demand for compensation, damages or non monetary relief against the Insured or (b) any legal proceedings…”

6. Here’s the problem
   Well - you don’t have either of those things. You don’t have a claim or demand for money and - you have no cover…yet. You need to be sued or hit with a demand.

So, here you are. You have a legal matter but no cover triggered.

What do you do?

Worse still you may even have a mitigation clause in your PI policy that says that at your own expense you must take all reasonable steps to avoid any potential loss.

So now you have to incur legal costs that are not covered under the policy and don’t erode the excess.

7. You need mitigation costs cover
   What you need is mitigation costs covered whether a claim is triggered or not to cover your reasonable costs and expenses of rectifying or mitigating a POTENTIAL claim.

Guys… unfortunately this is all too common. Some insurers offer this cover, some do not, but you need advice on your needs.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• litigation