Professional Indemnity FAQ

Limits of Liability - Costs Exclusive or Cost Inclusive

What is the difference between a "Costs exclusive" limit of liability and a "costs inclusive" limit of liability?

Simply that the Legal costs for handling the claim are kept separate form the actual limit of liability.

Then the limit remains for settling the damages only.

There is however a proviso that the legal costs cannot exceed the amount of the maximum limit. With a costs inclusive limit of indemnity, both the legal costs accrued and whatever is left over to pay for damages are in the one sum insured.

Costs exclusive limits are mostly found in professional indemnity policies but costs inclusive limits are found in Directors and Officers policies. Which is why most Directors are under insured.

Latest News

Illegal or unsuitable cladding now a big issue

Why we have laws, regulations and Australian standards? Because some people just do the wrong thing all for the sake of making money. The cladding issue is the subject of 4 Corners program on the ABC.

We are already seeing Insurance policies now placing exclusion endorsements into their policies excluding and claims relating to illegal cladding. We are seeing Governments demanding Audits of all existing buildings above a certain height. There are accusations of Builders taking other short cuts such as on Wiring, Pipes and sprinkler systems. 

The question is, who is to blame? Who will take responsibility?

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Small business in NSW

Right after the NSW Government have reimposed Fire Service Levies, they have at least made an effort for small business. The government has announced it will abolish stamp duty on a number of policies taken out by a small business. This is an important change.

What is a small business? In order to gain the exemptions, the business must be a small business for Capital Gains Tax Purposes for the income year in which the insurance is effected or renewed. A small business for CGT purposes is: “an individual, partnership, company or trust that is carrying on a business, and has an aggregated turnover of less than $2 million.”

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