Home and Away – what are your limits?

One of the important things that a business should consider when buying professional indemnity insurance is the territorial and jurisdiction limits that apply to the policy. This may seem to be an obvious statement, however many policy holders are confused by what underwriters mean by these terms. The default potion that many policyholders adopt is often to ignore what the policy says is covered and then panic if a claim comes in!

Simply defined the Jurisdiction limits of a policy relate to the countries in which the policy will pay to defend a claim brought against the insured. On the other hand the policy territorial limits (sometimes referred to as geographical limits) relate to the countries in which the policyholder is insured to carry out their work. It is not uncommon for the territorial limits and the jurisdiction limits of a professional indemnity policy to be different.

For example a structural engineer may be insured by his professional indemnity insurance policy to work in the UK and Europe as territorial/geographical policy limits. The jurisdiction (or legislative limits) may be restricted to the UK only. This would mean that whilst the policy would cover him to work in France for example, it would only pay to defend a claim that was bought in the UK courts.

For many businesses such as Architects and Accountants whose clients are totally UK based with no overseas subsidiaries, a professional indemnity cover which provides UK jurisdiction and territorial limits will be perfectly sufficient for their needs, however some professions will need wider cover. Buyers of PI insurance should remember that you do not need to actually work abroad to be exposed to claims – a web designed with a modest turnover based in Bognor Regis will need cover for worldwide jurisdiction including US/Canada as his work will be visible throughout the world.

In general terms most PI insurers will grant European cover without making a particularly high charge as compared to their UK premiums. Equally worldwide cover excluding USA and Canada does not necessarily attract a particularly high premium. The real issues arise when cover is required for USA and Canada. At this point and depending on the profession and the work that is being carried out, premiums can mount steeply. The normal compromise where professional indemnity cover is required to include these territories is to provide cover for Worldwide Geographical limits and Worldwide excluding USA and Canada Jurisdiction. How sensible this compromise is depends on the individual clients circumstances, the work that they are doing, their asset base and how their business is structured.

As ever, it pays to take good independent advice. PI Expert is pleased to offer advice to customers who need help in understanding how the geographical and jurisdiction limits of a Professional Indemnity policy can impact on their business and to put together a cost effective insurance programme that meets the needs of the business.