When it comes to insurance, there are a few key terms and phrases that pest managers would benefit from knowing in case an unforeseen circumstance arises.
You should be familiar with two main types of insurance in your profession: public liability and professional indemnity.
Professional indemnity insurance provides cover against a range of potential threats, such as claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.
What does ‘claims made’ mean?
Professional indemnity policies are written on a claims made basis. Essentially, you are insured for claims made against you in that 12-month policy period. The incident or circumstance giving rise to the claim can be from previous policy periods, although you must have continuity of cover.
Why is continuity of cover so important?
Once you let a claims made policy lapse, and there is a gap in cover from when the old policy ended and the new policy starts, the retroactive date will be the inception of the new policy. This means that any pest control work or reports completed prior to the new policy being put in place will not be covered.
Insurance is still recommended when you cease trading or when you retire, which is called ‘run off’ cover. Run off cover provides protection should a claim arise after the business has ceased trading. Every year the premium is discounted, as the likelihood of a claim materialising reduces.
Why are some claims are declined due to disclosure issues?
When completing an application for a new policy or forms at renewal, your broker or insurer will always ask if you are aware of the following:
- Any circumstances that may give rise to a claim
- Any claims made against you.
If you are aware of any potential claims, you must notify your broker or insurer immediately or you may risk the claim being declined.
What is a circumstance or potential claims notification?
- An indication by a client, former client or other third party, whether expressed or implied, of an intention to claim against you
- Criticism of your performance, which could give rise to a financial loss
- You becoming aware of a deficiency in the performance of your services, or your client feeling that you failed to meet the standards required.
If in doubt always speak with your broker; a two-minute phone call may save a lot of time and stress. Let’s use an example to highlight the potential impacts of failing to notify your insurer.
A timber pest inspector who has been insured with the same company for five years completes the renewal declaration for the sixth year, noting they are not aware of any potential claims. Six months after the renewal of the policy, the inspector is sued for failing to identify a severe termite infestation. The inspector then advises he was made aware of the issue 18 months earlier and engaged his own lawyer to deal with the issue. In the 18 months that passed since, further structural damage has been reported and the amount now being claimed is triple that of the original amount.
Had the insurer been notified at the time they might well have been able to deal with the claim from the outset at minimal cost. Your insurer may be able to refuse to meet claims notified late by arguing that their position has been prejudiced, or indeed cancel the policy from inception, as your duty to disclose has been breached.
Public liability insurance
Public and products liability insurance protects you and your business against a broad range of legal liabilities, including third party personal injury and property damage.
Some examples of public liability claims:
- Pest manager causes property damage (i.e. chemical spray used causes carpet stains, ladder falls on vehicle)
- Timber pest inspector falls through ceiling while inspecting roof void
- Chemicals used cause injury to pets.
There can be complexities involved with sub-contractors and your liability for the work undertaken by them.
Say the potential homeowner (client) approached you, the timber pest inspector, for both a timber pest inspection (AS4349.3) and a pre-purchase building inspection (AS4349.1). You then engage another entity to conduct the building inspection and you invoice the client for both reports. The client sees you as the one company despite two separate reports being issued. Consequently, this arrangement could be construed as you having some level of liability and any error by the sub-contractor (the building inspector) can be seen to be your error. This is also known as vicarious liability.
NB. This does not constitute legal advice and you should consult a lawyer if you need advice.
James Wallace, Director, Wallace Risk Solutions