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

Robert Cooper - one of 100 faces of small business

This week it was announced as part of Small Business Week,  that Robert has been named one of the 100 faces of small business for a State Government promotion on the great value that small businesses play in the State of Queensland.

You can see Robert's entry here:

It is the third accolade for CPR Insurance Services in a month and after seven and a half years in business is a real pep up for the company.

For Robert, it is the culmination of many years experience, becoming well qualified, experiencing the highs and lows of a career and always wanting to contribute to his community. Sometimes, these things just come together and you receive recognition for your efforts.

Robert says that there is no doubt that starting your own business is a huge challenge, but with the right research and planning, the right people around you and a good set of values that you apply to the vision of the company, you have a very good chance of making it all succeed.

Robert says he is lucky. He has a strong supportive Wife, Mandy, who is also part of the business, along with efficient and hard working staff such as Julia McLauchlan and Aidan Harmer who are building up their own skills in a learning environment. 

However, the most important and most supportive people for CPR Insurance Services are our clients who have stuck by us and supported us over the past seven years. Our focus remains on providing the best possible service we can and always acting in their best interests. To all our clients, we say thank you!

read more

CPR Insurance wins Brokerage of the year

CPR Insurance Services picked up the award for the Best Brokerage (1-5 staff) in Australia, last Friday Night (4th May 2018) at the Insurance Business Magazine Awards held at the Westin in Sydney.

Judging came from various parts of the industry. It is a great honour to be recognised for our hard work and particular Business values we follow. A full list of winners is listed here.

Success comes from having great staff, and we thank Aidan Harmer and Julia McLauchlan as important support staff for helping us win such an award.

CPR Insurance has been in operation for more than 7 years now and is only successful because of the wonderful support from our staff, insurers and most importantly, our fantastic clients who put their faith and trust into our company to be their Risk Advisers and Brokers. 

Thank you to all.

read more