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Exclusions are a crucial aspect of business insurance that must be understood to avoid being uninsured or unprotected, as well as to avoid claims payouts being rejected.
Unfortunately many business and personal insurance buyers and policyholders are caught off guard by insurance gaps resulting from exclusions. In this article we outline common exclusions found in professional indemnity and public liability insurances so businesses stay informed.
Insurers update exclusions and conditions regularly so it's important to review business insurance policies at renewal for any terms and conditions under which the coverage won't apply.
Exclusions in policy documents describe the circumstances under which a claim won't be paid. Additionally there may be limitations to coverage due to exceptions that apply under certain conditions or time periods. Taking the time to check for exclusions can be invaluable in avoiding surprises.
Professional indemnity cover is an essential protection for any business that provides a service — and covers an extremely broad range of professions, from architects to hairdressers — in case a client or customer makes a claim of professional misconduct, malpractice or failure of duty in providing a professional service.
Exclusions that are common in professional indemnity (PI) policies
A broker who understands your business risks can advise if it's necessary to add these insurance extensions to your standard cover.
An architect had professional indemnity insurance cover for her business. One of her clients, a property developer, accused her of providing faulty design plans that led to significant delays and financial losses on a construction project.
On receiving the damages claim she immediately notified her insurance provider and filed a claim under her PI policy. However, during the investigation it was discovered that the claim was based on an incident that occurred before the policy's specified start date. The policy clearly excluded claims related to incidents that occurred prior to the policy's commencement.
As a result, based on the exclusion, her insurance provider denied the claim. She was disappointed that her insurance wouldn't cover the claim but relieved she had been made aware of the exclusion. This allowed her to take appropriate measures to protect her business and seek legal advice to handle the claim independently.
Public liability insurance is an essential protection for any business that deals with the public or provides open access to the business premises. The cover is intended to cover the legal and settlement costs of a member of the public bringing a claim for physical or psychological injury, or damage to their property as a result of your business activities.
Exclusions that are common with public liability insurance
A restaurant owner had public liability insurance cover for her business. One evening a customer slipped and fell on a wet floor near the entrance, sustaining injuries. The customer filed a claim against the restaurant, seeking compensation for medical expenses and damages.
The owner promptly reported the incident to her insurance provider and submitted a claim under her public liability policy. However, during the claims investigation it was discovered that the policy contained an exclusion for claims arising from slip and fall accidents caused by wet floors. This exclusion was a standard provision in the policy and applied to similar incidents.
The insurance provider denied the claim, based on the exclusion. Despite having public liability insurance the specific circumstances of the incident fell within the terms of the exclusion, leaving the restaurant owner personally responsible for the customer's medical expenses and the potential legal costs.
This case serves as a reminder of the importance of carefully reviewing policy exclusions and understanding their implications. It is crucial for businesses, especially those in the hospitality industry, to implement safety measures to avoid accidents like slips and falls.
Additionally businesses should consider additional coverage options, such as premises liability insurance, to address specific risks that may not be covered under a standard public liability policy.
By being aware of exclusions and taking proactive steps to mitigate risks, businesses can better protect themselves from potential claims rejections and financial liabilities.
Understanding the exclusions and limitations to insurance cover is vital for protecting your business from potential gaps in coverage. Gallagher insurance brokers are experts in policy wordings and the ability to recognise where and when exclusions are imposed. Connect with our team of experts to gain valuable advice about changes in terms when renewing or taking out business cover.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient's industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers' control.
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