III Exam|IC 74, Liability Insurance|One Liners|Professional Indemnity Insurance|Chapter 7

III Exam|IC 74, Liability Insurance|One Liners|Professional Indemnity Insurance|Chapter 7

The Liability Insurance (IC – 74) is a paper in III exam  for Non Life Insurance. The Liability Insurance (IC 74) is a optional paper and it comprises of 30 Points. This is the most important paper in III Examination, and most people prefer this paper.
This paper comprises of 100 Multiple Choice Questions. Aspirants need to score 60% in this paper to qualify for Licentiate.

We are providing Chapter 7: Professional Indemnity Insurance one-liners of this paper practice of Non Life Insurance (IC – 74) which will be very important from exam point of view. This one-liners is very easy to understand.

Chapter 7: Professional Indemnity Insurance

• Need For Professional Indemnity Insurance: Professional Indemnity Insurance Policies Are Designed To Provide Insurance Protection Such As Doctors, Solicitors C.A. & Architects Etc. Against Their Legal Liability To Pay Damages Arising Out Of Their Damages Arising Out Of Negligence In The Performance Of Their Professional Duties.
• Insurance Brokers Functioning In India Are Compulsorily Required To Insure Their Liability In Terms Of The Irda Regulations For Brokers.

In India Prof. Indemnity Pol. Is Given To Those Professionals:-

1. Who Are Governed By Practices & Services As Laid Down By Statutory Organisation Body And
2. Are Answerable To The Governing Council In The Event Of Failure To Adhere To These Practices.

• Medical Professional By : Medical Council Of India
• The Engineers Or Chartered Accountant –Would Be Issued Errors & Omissions Policies.
• The Basis Of Liability Is Negligence, Negligence Would Mean Failure To Exercise A Fair, Reasonable And Competent Degree Of Skill As Judged With Reference To The Standard Expected Of The Profession.

1. Lanphier V. Phipos -1838– Doctor Case
2. Chapman V. Walton-1833–  An Insurance Broker Case
3. Badgley V. Dickson(1886)– An Architect
4. L.B. Joishi V. T.R. Godbole-1968– Doctors

• The Basis Of Liability Is Professional Negligence Which Presuposses:

1. The Existence Of A Duty Of Care
2. A Breach Of That Duty And
3. Loss Or Damage Cause By The Breach

• The Professional Will Also Be Liable On The Principle Of Vicarious Liability.

The Duty Of Care Is Owed To Two Categories Of Persons:

1. Those To Whom The Professional Man Is Under Some Contractual Or Fiduciary Relationship. Here, The Basis Of Liability For Professional Person Is Breach Of Contract Between Him And Client Due To Negligence In The Performance Of Professional Duty.
2. Those To Whom A Duty Of Care Will Arise Under The Circumstances Coming Within The Scope Of Hedley Byne Decision.
3. Hedley Byrne & Co. Ltd. V. Hellers & Partners Ltd.-1963- -Appropriate Circumstances The Professional Would Be Liable To Persons Other Than His Clients.
4. The Services Provided By Medical Professional Is Within The Scope Of Consumer Protection Act, As Per Decision Of Supreme Court Of India.

Classification Of Professional Risks:

1. Where Professional Negligence May Result In Bodily Injury(Fatal Or Otherwise) Doctors, Dentists Fall Into This Group
2. Where Professional Negligence May Result In Financial Loss. Accountants, Solicitors Etc. Fall Into This Group
3.  Where Professional Negligence May Result In Financial Loss And/ Or Bodily Injury.  Architect Etc. Fall Into This Group

• Policy Form: Professional Indemnity Policies Issued In India Are Generally Structured Along The Lines Of Industrial/Non Industrial And Products Liability Policies.
• The Indemnity Clause No.2: The indemnity Applies Only To Claims Arising Out Of Bodily Injury And/ Or Death Of Any Patient Cause By Or Alleged To Have Been Caused By Error, Omission Or Negligence In Professional Service Rendered Or Which Should Have Been Rendered By Insured Or Qualified Assistants Name In The Schedule Or Any Nurse Or Technician Employed In The Schedule.

The Two Provisos To The Clause Are:

1. Such Act During The Period Of Insurance Result In A Claim First Made In Writing Against The Insured During The Policy Period.
2. No Liability For Any Claim For Act Committed Or Alleged To Have Been Committed Prior To The Retroactive Date Specified In The Schedule.

• Limit Of Indemnity (Clause No.3): Irrespective Of No. Of Persons Or Entities Name As Insured In Schedule, The Total Liability Of The Co. For Damages Inclusive Of Defence Cost In Respect Of All Claims Made Against The Insured During The Currency Of Insurance, Shall Not Exceed The Limit Of Indemnity For The Policy Period Stated In The Schedule.
• Claims Series Clause :No.6 : Where A Series Of Losses And/ Or Bodily Injuries And/ Or Deaths Are Attributable, Directly Or Indirectly, To The Same Cause Or Error Or Omission In The Discharge Of Professional Servies;

1. All Such Claims Are Added Together And Treated As One Claim And
2. Such Claim Shall Be Deemed To Have Been Made At The Point In Time When The 1st Of The Claims Was Made In Writing.
3. However No Coverage For Claims From The Same Cause, Which Are Made Later Than 3 Years After The First Claim Of Series.

Compulsory Excess/Voluntary Excess (Clause 7 And 8) :

1. These Clauses Does Not Appear In Doctors And ‘Medical Practitioners’ Policy.
2. It Is Applicable To Medical Establishment Policy Where The Insured Has To Bear For Each And Every Claim A Compulsory Excess.
3. Compulsory Excess Of 0.25% Of The Indemnity Limit For Each & Every Claim. For Example Minimum Of Rs.1500 And Maximum Of Rs.125000

• Indemnity Clause No.2: The Indemnity Applied Only To Claims Arising Out Of Losses And/ Or Damages During The Period Of Insurance First Made In Writing Against The Insured During The Policy Period.

1. . The Premium Rates Charged For Individuals are On The Basis Of Annual Indemnity Limit.
2. The Organisation & Co.’S, In Addition To The Indemnity Limit, Premium Are Charged On Annual Fees Or Turnover And The Staff Strength.
3. In Case Of Medical Establishment, Premium Rates Are Charged On The Basis Of No. Of Patients. Loading Of Premium Is Provided For Extra Facilities Like X-Rays Etc.

Computer Services & Software Developers’ Professional Liability Policy:-

• These Policies Provide Coverage For Legal Liability Of Insured To Compensate Others For Loss Resulting From Insured’s Wrongful Act. The Wrongful Act Must Be By Insured In Performance Of Computer Services For Other For A Fee.  The Wrongful Act Must Take Place After Retroactive Date And Before End Of Policy Period. Wrongful Act Means Actual Or Alleged Negligent Act, Error Or Omission In Performance Of Computer Services.
• Exclusions: Delay In Performance Or Failure To Perform, Guarantee, Warranty, Penalty Deemed Uninsurable Under Law.                                                   Actual Or Alleged Intentional Non-Performance Or Default Of Any Insured Contractual Obligations.
• Limit Of Indemnity: For Each Wrongful Act (Aoa Limit) And Aggregate Limit For The Policy (Aoy) Limit.

Extensions:-

1. Loss Documents Extension Covering Legal Liability Arising Out Of Destruction/Damage/Loss Of Documents Pertaining To Insured I Customers Which Have Been Entrusted, Lodged Or Deposited With The Insured.
2. Loss Of Date Extension Covering Legal Liability Arising Out Destruction /Damage/Loss Of Date Pertaining To Insured Customer Which Have Been Entrusted, Lodged Or Deposited With The Insured.
3. Dishonesty Of Employees Covering Liability Of Insured From Any Claims For Fraud/Dishonesty Of Any Employee Of Insured.
4. Infringement Of Intellectual Property Rights Covering Compensatory Damages For Unintentional Ipr Infringement.
5.  Technology Liability Extension To Cover Hacking, Virus Attack, Denial Of Service Attack.

• Premium: Depends On Past History Of Clients, Contract Value/Gross Revenue And Duration, Territory And Jurisdiction Of Coverage, No Of Employees Working On The Project Etc.

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