All the stuff you need to renew was sent out by email from Aon Friday 18th November. If you have not yet found it, look in your spam folder, or contact Aon: nz.nzacs@aon.com This included The Guide to Renewing Insurance which is a step by step guide to help you navigate the portal. The Important Notices contains contact details at Aon if you would like to speak to someone and seek more information about the insurance cover.
It’s not that hard! I did mine in under half an hour BUT before you start, get your ducks in a row:
• Have a record of what you earned last financial year, broken down by project type.
• Think about and list your five biggest-fee projects in the last 5 years.
• If there has been a change in directors and principals from last year, have all their names and qualifications at hand.
• Think about the companion liability covers you may need (see our Last Communique on cyber cover).
• Think about what is an appropriate level of cover (more on this later in this Communique).
As a result of user-experience, Aon has commented as below:
• When logging in, click the forgotten password to re-set your password if you don’t remember, or need to update it.
• You get 5 attempts to log in before being locked out and asked to Contact your Administrator . Contact Aon NZACS Team nz.nzacs@aon.com if you are locked out so that your account can be re-set.
• Fees & Activities - Splitting out percentages of work: At the insurer level, architectural design work is split into 3 categories Residential, Commercial or Schools. Hospitals, Government and the public sector are regarded as Commercial. There is a place to include ‘Other’ work if you do not fit into any of the categories stated, to capture work that is not core architectural services.
• Applying for Cyber Liability: Question (e) asks if you “have physical security controls in place to prohibit and detect unauthorised access to their computer system and data centre”. Physical security is locks on doors, key or card access etc; ask yourself how easy it would be for (say) someone to walk in off the street and access or steal your computer system or data centre.
The level of cover is for your practice, for all projects for the insurance year. PI cover does not relate to individual projects, but if you need to, you can increase your cover at any stage during the year.
A key decision you need to make is the level of cover you are seeking. Some clients are requiring a minimum level of cover, and if you want to work with them you will need to carry that level of cover in order to meet the terms of engagement. Otherwise, it is a matter of the risk you are prepared to carry, versus the cost of passing that risk to an insurer.
The purpose of the PI cover is to protect your assets and business in the event of a claim. You need to think carefully before exposing those resources to risk. A doubling of your cover (for example) would typically be at a marginal cost (maybe 20-50%) and not a doubling of the premium.
Many smaller practices and sole traders are tempted to limit PI cover to the minimum $250k set out in the NZIA AAS agreements. But those practices also tend to be doing residential work, where the liability will NOT be capped at $250k, because the Consumer Guarantees Act exposes those practices to unlimited liability.
Yes, you might attempt to hide behind a family trust or a limited liability company to avoid the prospect of becoming personally liable for that part of a successful claim in excess of $250k.
BUT claimants have successfully recovered money on the basis that a beneficiary to a trust has the resources of the trust available to meet a claim. AND if you were a director of the company and personally involved in the failed project, then the prospect of a personal claim against you is very real.
Insurance is a mechanism of transferring your risk to another party i.e. an insurer. In exchange for consideration, often referred to as ‘premium’ the insurance company will agree to pay an agreed sum of money, referred to as an indemnity, when an event or events happen.
The insurance policy is a contract agreement and like any form of contract sets out the terms of agreement; what the contract is for, when to call on the contract, and the types of events covered, as well as the types of events not covered.
This commentary focusses on Professional Indemnity insurance and factors to consider if contemplating changing insurance provider.
Policy Coverage
Professional Indemnity insurance (PI) policies offer cover on a negligence or civil liability basis. Civil liability policies are the most common policies and cover a broad range of risks.
For Architects, Architectural Designers or Draughtspersons, claims can have allegations of negligence, breach of the duty of care that a client could reasonably expect from you, defamation, breach of confidentiality, breach of copyright, breach of intellectual property, unfair competition or breach of contract.
In addition to paying the compensation claim “the settlement”, the PI insurance arranged through NZACS also provides cover for your associated defence costs. This includes lawyers’ fees and expert witness costs.
CHECK – Is the Policy
• Negligence only or Civil liability?
• Are the defence costs paid in addition to the Indemnity limit or part of the Indemnity limit?
• Does the policy include Quasi Judicial or Registration Board investigations or enquiries (such as NZRAB or LBP Board)?
(For the policies arranged through NZACS, the answers are “Negligence and civil liabilities”; “Yes”; “Yes”)
It isn’t just about the number of policy extensions a policy has. Often policy extensions are noted separately as a way of limiting or defining the cover and would already be included within the definition of the Insuring clause.
(The policies arranged through NZACS are specifically written around the risks faced by architects)
CHECK – What to look for:
• The policy needs to be read in its entirety. Insuring clauses and the definitions, extensions and exclusions and policy conditions.
• What is important for you and your practice?
• What do you need to have cover for and what is ‘nice to have’ but not essential?
Claims Made Basis
PI policies fall into a category of insurance known as ‘claims made’.
This means that you need to meet certain conditions to access the indemnity. These may differ policy to policy, and it is important that you understand your policy conditions if you are aware of a claim or circumstance and are thinking of changing provider.
Common policies require the following:
• You must have a current policy in place at the time a claim is made against you and/or you become aware of circumstances that could result in a claim being made against you.
• You must notify the claim or circumstance before the policy due date passes (the policy expires).
• The claim or circumstance must relate to a period after any policy Retroactive date.
• The notification must contain sufficient information to meet the policy claims conditions.
Retroactive date:
Claims can arise long after a project is complete. In most instances PI policies can offer indemnity for past projects, and this cover is given by way of a Retroactive date. It means that you are covered for claims that relate to your activities carried out from the retroactive date going forward.
CHECK – Maintain existing Retroactive date?
• Most insurers will accept your existing Retroactive date even if they are not your current provider.
• NZACS carries your existing Retroactive date into the new policy provided you provide evidence of current insurance and the Retroactive date.
Maintaining Continuous Cover
Try and avoid being uninsured i.e. allowing one policy lapse before you arrange the next one. If you become aware of a claim or circumstance during an uninsured period, then you will not have any insurance cover, even if it is related to a project you did when you had cover (such is the nature of “Claims Made”)
Insurers will accept your existing Retroactive date provided you do not have a prolonged period without insurance cover.
Claim Time
Claims are unforeseen and unexpected but if they happen then you will expect the insurance contract to make good on its obligations and indemnities.
Claims can be stressful, complicated and take a long time to resolve.
CHECK –
• What happens if I need to make a claim or circumstance?
• How much do I have to contribute towards the claim and when is it payable (your excess)
• What support in addition to policy cover can I get?
o How is my claim managed – what experience does my association/broker/insurer have in the types of claims someone in my profession could have?
o What experience are the lawyers should I need one?
o Do I get help mitigating the claim - often an experienced adviser can work with you to resolve the claim long before it reaches litigation?
(The NZACS Claims Committee is available to assist members insurers and lawyers in the event of a claim or threatened claim; the lawyers are all on a “panel” which has proven skills and experience in claims made against architects and engineers)
(This article was provided by Aon, the insurance brokers who manage the NZACS PI cover.)
There were over 600 registered for the NZIA/NZACS webinars in September (“Key Risks”) and November (“Legal Issues”), both presented by the NZACS Claims Committee - Alec Couchman and Colin Orchiston. For those unable to attend and for those who prefer to read the notes rather than see the video recording, the notes have now been uploaded on the NZACS website. The notes include the many claim examples that we could not cover off in the webinar itself.
In the resources section available to members only, they are categorised under “Risk & Liability” and should pop up at the top of that list.