BIBA Webinar: Covid-19 from a PI Insurance Perspective
In light of the particular challenges being faced by the insurance sector as we navigate through the COVID-19 pandemic, Mike Wood, Associate Director at Griffiths & Armour Professional Risks, took time out to deliver a webinar hosted by the British Insurance Brokers’ Association (BIBA).
The session, which is summarised in this article, is part of an established and ongoing partnership with BIBA, which includes Griffiths & Armour being an approved scheme provider of Professional Indemnity (PI) Insurance to members. The webinar provided BIBA members with insights, observations and recommendations in the following key areas:
The current position surrounding Covid and the industry comments to date.
Investigating the concerns being raised by our broker clients and others that have been contacting us in recent weeks.
Assessment of the potential criticisms brokers may face over the coming months from clients and the regulator.
Examine broker’s duties and reinforcement of recommended best practice.
Looking at what brokers should be doing around their own complaints procedures and PI cover.
To provide an open forum for brokers to air their own experiences and ask pertinent questions that they or their colleagues are facing.
The webinar proved be in high demand and was extremely well received by those who managed to register early. As is invariably the case, it was oversubscribed so our apologies to those who missed out. We decided to collate the feedback and questions raised, including comments made from many brokers about their experiences and concerns and share them with you as our valued broker partners.
Below we have summarised a number of the questions from the webinar that an insurance broker should consider in preparation for their PI insurance renewal as well as other key elements from the Q&A held towards the end of the webinar session:
Future underwriting – What proactive actions / questions should you consider?
What Business Continuity Planning and risk mitigation strategy is in place, particularly actions taken regards Covid-19?
Staff supervision – how is this undertaken when working remotely, including file auditing?
Cyber security – what steps have you taken to maintain resilience whilst working remotely?
Are you/your team prepared and resourced for the possible need to manage complaints, clients may potentially bring over the coming months (or have already brought)?
Processes – how confident are you in your processes and documentation that you will not have any vulnerability to complaints and claims?
Procedures – how are you advising clients of any coverage restrictions or material changes to their policies in light of the Covid-19.
How will your business maintain quality of output / service during downturn?
How many Business Interruption and Event Cancellation or other policies do you have that may be expected to respond to a pandemic of this nature – and who are your top 5 Insurers in this respect?
Webinar Session – Q&A
I have just renewed my policy and a complete coronavirus/pandemic exclusion has been added. Should I accept this and is this now the market-standard?
The picture is fluid and changing on an almost daily basis so we cannot speak with any certainty on what the wider market is doing. Firms should carefully consider whether to accept a full exclusion and obtain legal advice if necessary. Our valued and loyal broker clients are not facing such severe restrictions at the moment and we are receiving excellent support for them from our carefully selected primary scheme insurer partners. Some level of Covid-related policy changes will be unavoidable for all but we will continue to be proactive in discussing these with our broker clients.
Is it prudent for brokers to notify their own PI insurers that they are aware of circumstances that could give rise to a claim, even if no direct intimation of one at this stage?
Brokers should carefully check the notification provisions within their PI policies but, in order for circumstances to be deemed valid notifications, typically there would need to be either:
a specific complaint, claim or allegation of negligence (whether that turns out to be justified or not) made by one of the broker’s clients; or
a concern from the broker that there is a potential claim that can be advanced against them in relation to their professional advice; or
a firm identifying that there has been a potential deficiency in their own performance.
If there are no complaints so far about the broker’s services and the broker themselves do not have any internal or private concerns, then it is unlikely there would be much benefit in notifying matters to insurers at this early stage, or indeed that insurers would accept them as a valid notification.
In relation to any class actions against insurers, these are still very much in the early stages and the prospects of that litigation being pursued is still something being assessed by the lawyers representing the effected group(s) of policyholders. We will be keeping a close eye on how this develops over the coming weeks.
If a case goes to the FOS and they find in favour of the broker/insurer, could the client still go to Court and get the decision overturned?
Consumers do not have to accept the final decision and can withdraw from the FOS process at any stage in order to take the dispute to Court instead. Whilst FOS decisions do not constitute legally binding precedents, they may provide a reasonable indication of the likelihood of success in subsequent Court or ADR (Alternative Dispute Resolution) proceedings.
Is there a view on what proportion of all commercial policies will provide COVID-19 cover under BI section? Do you know of any insurers that are paying out on their BI yet?
The Association of British Insurers indicated in late April 2020 that its members expect to pay out over £1.2bn in claims to support businesses and individuals affected by Covid-19. Of the £1.2bn working estimate, they think that roughly £900m relates to business interruption claims, £275m for cancellation claims on travel insurance, and £25m across wedding insurance, school trips and events.
The figure does not include claims made through Lloyd’s and the London Market.
The general market consensus is that there are few commercial policies that have intentionally provided cover for pandemics. As you will no doubt have seen, a number of insurers are involved in class actions against them from a number of groups where they believe cover was not expressly excluded, and therefore that the policies should pay out.
What are brokers doing regarding being proactive in flagging restrictions due to, for example, unoccupancy? Surely we should act on the policy wording rather than how we hope insurers will respond in the event of an incident?
Providing timely and accurate information is always important, and the current situation highlights this more than ever. Brokers should advise clients on the exact details of how policies would be expected to respond as currently drafted but should never say whether they think a customer’s claim is (or should be) covered.
We would all hope, and should be actively discussing with our insurer partners, a degree of leniency and flexibility to be shown when insureds are forced into breaching policy conditions to matters beyond their control. The FCA has made it clear that following rules and regulations in respect of public health concerns should not impact on a client’s ability to make a claim.
Are PI insurers recommending taking independent legal advice on checking policy wordings?
This isn’t something that has been specifically recommended but clearly it may help to inform your ongoing conversations with insured clients. There is though always a danger that, should insurers refuse to provide indemnity, the next avenue a lawyer will seek to explore is bringing a negligence claim against the broker in question.
I have been asked to provide insurance expertise on a local radio station call-in for local businesses on Covid-19 issues. What are PI insurers views of this?
The first point to make clear is that any comments or contribution through media channels is better advised against. As well as possibly being dangerous for an individual or firm, there are potential negative consequences for the wider broking profession. In such uncertain times, and with opportunistic claims firms looking for insight and avenues to explore, any public statements or comments are open to interpretation and can be taken out of context by others in order to work up their own version of the truth to target brokers or encourage litigation.
Although we doubt that PI insurers have the ability to directly prevent their broker policyholders to contribute or make statements, I expect they would take a dim view and could have implications at future renewals. There is also the danger that a firm could prejudice its own defence to complaints and claims by making comments in the public sphere.