There are several insurance providers who offer Professional Indemnity (PI) insurance.
The offerings range from policies offered by reputable insurance firms to ‘cheap and cheerful’ policies available via the internet. In selecting your PI insurer it is important to evaluate the adequacy of cover offered, as well as the cost. Some low-cost policies contain broad exclusions which can take away large amounts of cover and leave the consultant significantly exposed in the event of a negligence claim.
Here are some examples of exclusions in low-cost policies that are offered to geologists, mining engineers and mining industry consultants in general:
• Poor cover for any financial or investment advice, with some exclusions extended to the valuation, tax implications or performance of any investment. Often consultant’s advice and reports would impact upon client decisions in these areas. Some policies went even further and had total investment performance exclusions. This sort of exclusion would prevent any cover for JORC Code or VALMIN type work.
• No cover for any corporate advisory work. This exclusion has broad implications and it would be best to avoid any sort of PI policy with such a broad exclusion. The term ‘corporate advisory work’ could mean many things and the worst time to discover exactly what the Insurer thinks it means is when a claim needs to be paid.
• Many policies have a total exclusion for ‘pollution’. Keep in mind that the legal definition of pollution is very broad – anything involving noise, air, water or vibration may be pollution.
• Many policies exclude any claims arising from any actual or alleged restrictive trade practices, restraint of trade or unfair competition. Often large mining companies specify in their contracts the need for such cover so the exclusion means the member would be in breach of their contract.
• Many policies have conditions which totally exclude advice or consulting in connection with mergers and acquisitions of entities. Much of our members’ work (such as resource estimation) may impact on such transactions and the potential for losses is huge.
• Some policies exclude any claims of actual or even ‘alleged’ advice in relation to finance, accounting or tax matters. All a third party needs to do is allege you advised in these areas and the claim is denied.
• No cover for advice which affects the price of, or market in, any shares or debentures of any company or commodity or currency. Again, this is an exclusion which is broad in its nature and its effect on cover can be hard to interpret.
Consultants should be aware that a good Professional Indemnity policy does not have any of the above exclusions automatically in the policy wording and provides a far broader level of cover.
Other benefits to seek out include continuous cover on a ‘claims made’ basis. The risk you run when changing insurers is the chance of losing PI cover for any past work where an employee or Director knew of a problem or dissatisfied client and the issue was not declared or fully discovered until after you change policies. The new insurer may decline the claim if it flares up down the track. An ideal scheme ensures ongoing cover for all past work. You do not need to worry about declaring all client complaints, all bad debts and problems on jobs with the insurer every year.
Also look for additional cover called statutory fines and penalties cover. This is a real benefit for consultants operating in a heavily regulated mining industry where members can be personally named and required to attend official enquiries with statutory fines and penalties which can be imposed.
The word of caution is at the end of the day you want your insurance policy to respond when a claim comes along that could threaten the existence of your business.
AusIMM has an alliance with Austbrokers Countrywide, who would be more than happy to review your existing policy, discuss with you the business activities and ensure the cover is right for your business. Feel free to contact us on phone 1800 245 123 or email us at firstname.lastname@example.org.