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.
• 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.)