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.

How to identify exclusions in insurance policies

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.

What are the common exclusions in professional indemnity cover?

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

  1. Prior known circumstances: claims related to circumstances known to the business before taking out the insurance policy are excluded.
  2. Incidents before the policy date: claims relating to incidents that occurred before the specified policy date are excluded.
  3. Fines or penalties: typically fines or penalties resulting from a damages claim are excluded.
  4. Limited liability: some contractors may stipulate 100% responsibility (of the policy holder/professional) which means PI insurance won't cover the claim.
  5. Refunding professional fees and claims arising from liability for paying trade debts or loans, as well as client business insolvency, are generally excluded.
  6. Risks associated with providing professional services, such as exposure to health hazards like asbestos or external threats like terrorism and war are often excluded.
  7. Certain occupations may have industry-specific exclusions related to core service offerings, such as investment advice from financial managers.
  8. Professional service exposures that are covered by other specialised insurance policies are also excluded from PI cover, such as:
    • directors and officers' liability
    • employment liability (including workers' compensation)
    • products liability and pollution liability.

A broker who understands your business risks can advise if it's necessary to add these insurance extensions to your standard cover.

Case study: architect needs local support due to PI exclusion

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.

What are the common exclusions to public liability cover?

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

  1. Limits on payouts and total amounts payable: one important factor to be aware of is that most PL policies impose limits on the dollar value of a payout, as well as on the total amount payable under a single policy.
  2. Exclusions related to faulty workmanship and inappropriate business conduct: PL policies commonly exclude incidents caused by faulty workmanship or a failure to conduct business appropriately. This means that claims and damages resulting from these causes would not be covered under a public liability policy. It is crucial for businesses to prioritise quality workmanship and proper business conduct to mitigate the risk of such exclusions.
  3. Exclusions for exposures covered by specialised insurance: PL policies also exclude exposures covered by other specialised types of insurance, such as product recalls and workers compensation.
    • The cost of product recalls is often excluded from public and product liability policies due to the high cost involved, and must be taken out as separate cover.
    • Workers compensation costs such as claims for medical bills are also excluded, since they're covered by mandatory workers compensation insurance.

Case study: restaurant's slip and fall claim denied due to exclusion

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.

Get comprehensive coverage — talk to a business insurance expert

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.

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