More on Fees and PI Insurance
Damian Harrison, of BJS Insurance Brokers, responds to Peter Sarlos’s concerns about PI insurance precluding claims for fees.
The recent essay by Peter Sarlos looked at the question of professional indemnity (PI) insurance policies precluding claims for fees.
This particular exclusion is placed on virtually all PI policies because insurers don’t want to be responsible for having to repay or pay an architect’s professional fees for services they have provided. However, they do want to insure their clients against any breach of professional services that has led the principals to ask for a refund of the fees (or refusal to pay).
Quite often insurers want to include or exclude a particular cover, yet what is actually printed in the legal documents, including the policy wordings, may be construed by lawyers as having a completely different meaning to what was intended. Every insurance policy wording is reviewed/written by lawyers, each of whom may have their own personal opinion about the terminology and phrasing of the wordings, which is why problems such as those outlined by Peter Sarlos can occur.
What it really comes down to is the ability for insurers to understand what cover they are trying to give, and not to reject a claim on the basis that they have made an error in the misinterpretation of a clause. Furthermore, it is also the responsibility for brokers to fight their client’s corner if the insurers take a stance that is detrimental to their clients’ position.
The insurer that Peter mentions does include a provision for the recovery of fees, but places a few provisos on this extension:
1) There must be a threat of a counterclaim.
2) The counterclaim must be for a sum greater than the outstanding fee.
3) The principal agrees not to purse a claim if the architect agrees not to press for their outstanding fees.
Any use of this policy benefit is classified as an actual claim, with the potential to increase the premiums accordingly, and when you add this to the client already having to contribute an excess payment, it is not clear how much of a benefit this extension actually is.
In contrast, I have come across another situation whereby an insurer agreed to pay for fees when it was clearly excluded under their policy – they took a commercial decision to settle to avoid having to deal with a much larger counter claim.
My general advice would be that, when looking at any kind of insurance, it is important to consider the policy in full. This is a fine balancing act – weighing up the advantages and disadvantages of different coverage available in different areas.
Damian Harrison is a senior account manager at BJS Insurance Brokers. This item first appeared in ACA Communique December 2013.