Despite your best efforts mistakes do happen. Even if you are confident in the quality of your work any professional is vulnerable to a claim or allegation of negligence when their professional advice or services fail to meet a client’s expectations, or their contractual commitments, even if they are only perceived failures.

Once a client commences a legal action, you must be in a position to hire the very best legal resources to defend you, or you will very likely lose the action and the consequences could be crippling. The cost of expert legal resources is extremely high, for example, a single day in court could cost you R150, 000, without taking into account pre-trial attorney costs. And that is just your costs without the damages if you are found liable, and as well as the claimant’s costs.

Policies vary from profession to profession and FEPL provides expert opinion and specially tailored wordings to suit each particular profession. In a nutshell the PL policy covers:

The cost of the best Legal Defense and Claim Mitigation Team
The damages and claimant’s costs, if the action is lost

This is the core cover, but there are many special extensions that FEPL negotiates.

A PL Policy (as well as D&O and Malpractice) provides cover on a CLAIMS MADE basis. The policy provides cover for CLAIMS MADE (and reported to insurers) during the period of the insurance policy only.

A claim or circumstances that the insured was aware of before the policy period would not be covered. Similarly, a claim after the policy period has expired would not be covered.

It is therefore of the utmost importance to report matters to insurers as soon as you become aware of them. This could be in the form of a summons, allegations of negligence, threats of legal action, or even just verbal criticism.

Even if you renew your policy, any known matters must be reported prior to the renewal. If you intend changing insurers this is even more important.

Once a claim or circumstance has been reported then insurers are obliged to protect the insured even though the policy period might expire and not be renewed.

This is covered by the provision of a RETRO-ACTIVE date.

There are 3 scenarios;

• When a policy is taken out for the first time the cover will be effective either from the first day of the policy period or from a RETRO-ACTIVE date that you may choose. Normally a RETRO-ACTIVE date is selected by a professional who has been delivering services to clients over many years and wishes to be covered for any actual or alleged errors that might have occurred prior to the first policy period but which he is not aware of at the time of taking out the insurance. There is a once-off additional premium for this.
• When a policy is renewed or even moved to a new insurer you still benefit from the same RETRO-ACTIVE date you chose on your first policy. This will continue for as long as you maintain your cover in force, no matter how many years back it might be.
  The timeous reporting of claims or circumstances is extremely important.
• If a policy is allowed to lapse you will lose the benefit of the automatic free RETRO-ACTIVE date. If you wish to re-instate the cover you will have to apply for a new RETRO-ACTIVE date (if that is what you require) and there will be an additional once-off premium payable.

The most common definition is “ when a person has departed from the conduct expected of a reasonably prudent person acting under similar circumstances” – he may then be accused of negligence or be guilty of a negligent act. In law, this is termed “Delict”.

The hypothetical reasonable person provides an objective by which the conduct of others can be judged.
The law considers a variety of factors in determining whether the person has acted as the hypothetical reasonable person would have acted in a similar situation. These factors include;

The knowledge, experience, and perception of the person
The activity the person is engaged in
The special skills required. If a person engages in an activity requiring special skills, education, and training, the standard against which his conduct will be measured is the conduct of a reasonably skilled, competent, and experienced person who is a qualified member of the group engaging in that activity – often an authorised group (by statute of law) such as lawyers, doctors, engineers, architects, financial services providers, and accountants.

Contracts between parties often impose additional obligations on parties that go beyond what is normally contemplated in common law.

A PI policy will not normally cover liabilities arising under contract (as opposed to delict) as they extend the potential liabilities of the parties (and their insurers) beyond what insurers are prepared to underwrite and accept. In certain circumstances, insurers are prepared to underwrite the contractual risks provided they are given all the information they require to either accept or reject the risk. For example warranties, indemnities, and guarantees.

Do not make any statements or admission of liability or blame
Contact FEPL immediately, we will assist you
Do not enter into any correspondence regarding the accusations or allegations. Refer the matter to FEPL, we will deal with it
Try to stay on reasonable terms with the plaintiff
Do not make reference (to the plaintiff or anyone else) to the fact that you have insurance

This is the maximum amount for which you will be covered in the event of a claim against you. It must be sufficient to cover both the damages that may be awarded against you as well as the legal costs incurred by you and, most likely, the plaintiff’s/claimant’s costs as well.

Bearing in mind the high cost of the best legal protection, particularly in the event of a court action running at upwards of R150, 000 per day in 2014 terms, you need to make sure that your limit of indemnity is sufficient to meet the most serious of claims against you. Otherwise, your personal assets will be under threat.

The limit of indemnity can be applicable on 3 bases;

Each and every claim, which is the best option
In the aggregate for the policy period, the least attractive option
In the aggregate plus automatic reinstatements, the next best option

Each and every claim means that your limit of liability remains intact no matter how many claims you have
In the aggregate means that the limit of liability is the total amount for which you will be covered during the policy period for all claims against you. The major problem with this is that once a claim or circumstance is reported to insurers, even if it is a spurious or an unlikely claim, insurers will reserve an amount against the limit of indemnity and you may then not be covered for a subsequent more serious allegation.
In the aggregate plus automatic reinstatements means that insurers will reinstate or top-up your limit of liability to a pre-agreed (and pre-paid for) number of times in the event of claims. If you are subjected to multiple claims your limit of indemnity could be exhausted
Unless you specifically ask for it, insurers will in most cases apply the in the aggregate basis

Your PI policy will cover legal expenses incurred in defending or settling a claim against you.
But they must be pre-agreed by insurers and/or the matter must be handled by insurers.
Do not incur legal costs without the insurer’s consent in writing or they may not be recoverable under your policy.