Continuous Cover: Key Considerations When Changing Insurers

There are a number of coverage considerations to contemplate on whether to change Professional Indemnity (PI) insurers to choose continuous cover.

Understanding Continuous Cover

One of the main policy features to be mindful of when considering changing insurers is continuity of cover. Generally, Professional Indemnity insurance policies are written on a “claims made” basis. This means any claim arising from facts and circumstances reasonably known to the insured before the start of the policy period will not be covered, even if the non-disclosure was unintentional. 

The Specifics of Continuity Clauses

Continuity of cover clauses extend cover under the current Professional Indemnity insurance policy to a claim arising from a fact, matter or circumstance reasonably known to the insured before the current Professional Indemnity insurance policy (i.e. during a previous PI insurance policy) and which could have been but was not notified by the insured under that previous PI insurance policy.

Berkley Insurance Australia’s Stance on Continuity

When it comes to Berkley Insurance Australia Professional Indemnity insurance the continuity of cover clause generally applies as follows::

1. BIA must have been the PI insurer on risk when the insured first became aware of the fact, matter or circumstance that gives rise to the claim.
2. If the fact, matter or circumstance had been notified to BIA when the insured first became aware, the insured would have been covered under the PI insurance policy in force at that time.
3. The insured must have been continuously covered, without interruption, by a PI insurance policy with BIA from the time the insured first became aware of the fact, matter or circumstance until the time when they notify same to BIA.
4. The claim will be covered under the terms of the current PI policy but is subject to the lesser of the indemnity limits under the previous PI policy or current PI policy.
5. Cover is subject to the insured not having engaged in any fraudulent nondisclosure or misrepresentation in respect of the fact, matter or circumstance.

Points of Discussion When Changing Insurers

As the continuous cover clause is considered a renewal benefit, this benefit can cease when changing insurers. So, if your client is moving to a new Professional Indemnity insurer, it is important to discuss with them matters that should be notified to their current Professional Indemnity insurer before expiry of the current PI insurance policy, including any:

1. facts, matters or circumstances that they, their employees and/or contractors are aware of that may lead to a claim; and
2. claims that have been made against the insured by a third party.

By taking the above actions, in the event that the notified facts, matters or circumstances convert to a claim, the Professional Indemnity insurer will be required to assess the claim in accordance with the terms, conditions and exclusions of the PI insurance policy under which it was notified.

Exploring the ‘Extended Continuity Cover’ Option

In some instances, it may be possible to obtain an optional extension known as ‘extended continuity cover’ from the new incoming Professional Indemnity insurer. This optional extension operates to back-date the continuity date for the new PI insurance policy such that it will not be limited to the date the new PI insurer comes on risk. Having this optional extension under a PI insurance policy will provide the insured with the same benefit as if they were continuing cover with their current PI insurer. However, it is not automatically included and is not generally readily available due to the additional exposure the new Professional Indemnity insurer can inherit. The nature of this optional extension can also vary significantly between PI policies, so it is critical to review its wording and understand if there are any time constraints or requirements that would need to apply for the extension to be valid.

The Benefits of Continuity Clauses

The continuity of cover clause under a Professional Indemnity insurance policy offers numerous advantages. The most valuable benefit is the peace of mind it can provide insureds that cover may still be available even when there is an inadvertent failure to notify a fact, matter or circumstance when they are first known to the insured which later converts to a claim. When you or your client are considering changing PI insurer – continuity of cover is definitely an item that needs to be discussed.

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Important Notice

Berkley Insurance Company (limited company incorporated in Delaware, USA) ABN 53 126 559 706 t/as Berkley Insurance Australia is an APRA authorised general insurer. Information provided is general only, intended for brokers and has been prepared without taking into account any person’s particular objectives, financial situation or needs. Insurance cover is subject to terms, conditions, limits, and exclusions. Underwriting criteria applies. When making a decision to buy or continue to hold a financial product, you should review the relevant Policy Wording.