Professional Indemnity FAQ

What is Loss of Documents

Loss of Documents - What is it?

Examples of Claims for Loss of Documents

Many people ask me, what would a claim for loss or damage to documents that you see usually as an extension to a Professional Indemnity policy?

These must be documents owned by a Third Party that are in the insured’s physical custody and control. A claim for a loss must arise where a third party has suffered some financial loss and it is not intended to cover an insured’s own loss.

An example can be an Architect who releases to a builder, his sole copyright/ownership in his architectural drawings of a multi-storey office block as per an agreed contractual arrangement. The drawings may stay with the insured until completion of the project.

But what happens if the Insured suffered a fire at the premises and did not keep a back up copy off site? There could be a long delay in the construction of the building. The builder could argue that he had suffered a direct financial loss arising from the destruction of his documents (the architectural drawings). He may seek compensation from the insured for the subsequent consequential loss caused by the interruption to construction of the project.

A similar example can be an Accountant who holds on to all the original receipts of a client while calculating his tax owing for the previous financial year. Perhaps he has a Storm causing water damage coming through the roof destroying all the paperwork. The Third Party may need to go to considerable expense in obtaining replacement copies from his own suppliers etc. He may seek compensation from the Insured for these additional expenses caused by the loss of the documents held in the Accountant’s care, custody and control.

Not a common claim but worth having the extension as it is usually free.

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