Professional Indemnity FAQ

Run Off Cover

Failing to take out ‘Run off’ cover

A very real situation is an Insured who closes his business, and despite the advice of his Broker, decides not to take out ‘Run off’ cover.

Here is an example.
Mr X was an architect, who decided, upon reaching 60 years, to sell his practice and retire. By agreement the buyer of Mr X’s business would provide ‘Run Off’ cover for two years under the buyer’s Professional Indemnity policy. The ‘Run Off’ cover for Mr X was not renewed after the two year period.

In the third year of retirement, Mr X was served with a Writ alleging breach of professional duty and negligence. Some 15 years beforehand, he had designed an office building in Tasmania. The building had a ramp leading from street level to a basement carpark and he had incorporated in his design a bridge from street level over the ramp to the front entrance of the office block.

Several months after the ‘Run Off’ cover had expired, some youths were mucking around on the bridge.

One of them went over the bridge railing and fell to the ramp below suffering severe spinal injuries.

The Writ specifically alleged that the design of the bridge railing was negligent, as it was lower than the applicable Australian Standard. Mr X was left to defend the Writ from his own resources, as he had no insurance cover when the claim was made against him.

 Pro-risk's view on the need for Run Off cover

Statute of Limitation Periods: How long do I need to avoid future claims

 

I often get asked, “How long do I need for ‘Run Off’ cover? This occurs when a Professional is looking to retire or has sold his business but the new owners do not want to be responsible for any of their past work.

When we tell them that they need to run off their risk we normally suggest at least seven years to meet with the statute of limitations. However, this statute does not always apply. In fact there are certain situations where this will not apply at all. For some other matters such as Defamation or Medical Malpractice it can be only three years.

Even then, there are circumstances where the Limitation of Actions Act 1974 allows extensions.

Section 31(2) of the Limitation of Actions Act 1974permits a court to extend a limitation period if "it appears to the court –

  1. that a material fact of a decisive character relating to the right of action was not within the means of knowledge of the applicant until a date after the commencement of the year last proceeding the expiration of the period of limitation for the action; and
  2. that there is evidence to establish the right of action apart from a defence founded on the expiration of a period of limitation".

If the criteria is met, then the court may extend the limitation period for 1 year after that date.

First and foremost there must be a "material fact of a decisive character", which really must not have been known until after "the critical date", and the applicant must also have taken reasonable steps to establish that fact before the critical date. For instance in medical negligence cases, it was considered that a patient discovering that his or her medical practitioner had performed at a standard below that to be reasonably expected would ordinarily be a "material fact of a decisive character".

Other critical elements to succeed are:

  • Evidence which goes to establishing a right of action; and
  • Absence of prejudice to the defendant caused by the delay.

To view more of this Act, go to:

http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/L/LimActionsA74.pdf

Latest News

Three Years running - Insurance Brokerage of the Year 1 to 5 staff

Mandy and Robert Cooper were extremely honoured and astounded to once again win, Insurance Brokerage of the Year for 2020 from Insurance Business Australia magazine. This is the third year running.

While this year has not been the easiest of years for the business with Covid 19, the Recession, the hard market and issues at Lloyds of London, we are literally all in this together as an Insurance Industry.

CPR Insurance Services continues to make our clients the number one focus of our business while managing our relationships with Insurers, who we need more than ever in this market climate.

CPR Insurance Services are a highly ethical Brokerage with a reputation as a trusted advisor who always acts in the Client's best interests. Their experience, knowledge and expertise is amongst the highest in the industry.

CPR Insurance Services is now ten years old as a business and is proud of being an Authorised Representative of Ausure and their partnership with Steadfast, giving CPR the strength and backing to match it with any Broking firm in the Insurance Industry, but remain focussed on supporting the Small to Medium business segment.

Memberships of the National Insurance Brokers Association, Australia and New Zealand Institute of Insurance and Finance, Australian Insurance Law Association, Australian Professional Indemnity Group and the Australian Institute of Company Directors, ensures CPR Insurance Services maintains the high standard of knowledge and expertise required to be one of the best Brokerages in Australia.

CPR Insurance Services also plays a strong role in their local community supporting other Sporting Clubs and Community organisations. They also support and promote local businesses with their operation of the Kedron Brook Business Group who meet regularly and has 174 members.

We are truly honoured to receive this National award once again for the third year as a recognition of CPR Insurance Services contribution.

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Finalist for QLD Broker of the Year

Robert Cooper was honoured to be nominated as a finalist for Queensland Insurance Broker of the year for 2020, as part of the National Insurance Brokers Association. Unfortunately he missed out on the ultimate award but is a reflection of the high standard that the industry now has for such awards.

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