Are you sure your insurance cover is complete from the word go?

by | Jun 5, 2023


Most short-term insurance policies covering material or property damage have an inception date, expiry date and/or renewal date, be it a monthly, annual, or a specific period insurance policy. At inception, the cover should be complete for all the insured’s interests as described by the insured. But is it?

Public Liability insurance

Due to continuous technological development and advancement, public liability is probably one class of business which is the most vulnerable to unknown exposures. 

For decades Public Liability insurance was based on what is termed a “claims occurring” wording. In essence the occurrence happened during the period of insurance although the claim is only lodged later, sometimes even after the expiry of the policy. 

As a result of  disasters such as the asbestos employers’ liability claims, including professional indemnity claims, insurers reviewed their policy wordings covering potentially long-tail claims. These wordings were then converted to what is now commonly referred to as a “claims made” basis. A “claims made” indemnity clause (also known as “claims incurred”) restricts the cover to claims that occurred and were reported during the period of insurance. Any claim incurred and reported prior to inception or after expiry of the policy, technically, would not be indemnified in terms of a “claims made” policy wording. 

To assist and accommodate the insured, retroactive indemnity can in some instances be purchased at an additional premium. Should the policy be cancelled, a “run-off” or extended reporting extension can be requested to potentially accommodate claims incurred but not reported yet. An additional premium will also apply in this instance.

All annual and specific Public Liability insurance as well as Plant All Risks liability wordings underwritten by Consort are currently on a “claims occurring” policy wording, which saves the contractor from buying additional “run-off” liability insurance. Employer’s liability is on a “claims made” basis.

Contractors All Risks insurance

Annually renewable Contractors All Risks policies would normally only include contracts commenced by the contractor or employer on or after the inception date of the period of insurance of the policy. 

Should the contractor or employer have any contracts during construction (work in progress), such contracts will be deemed to be excluded under a different policy from the new insurer. “Run-off” cover needs to be arranged with the previous insurer or “run-on” cover with the new insurer. In both instances an additional premium will be payable and in the event of “run-on” cover, there will always be an element of a dual premium payment. 

Unless one of these options are carried out the contractor or employer may find themselves without insurance for all uncompleted contracts at the inception of their new insurance policy.

A word of caution to all brokers

Should you be uncertain regarding the adequacy of the policy wording, ask the underwriter to explain it to you. Contract conditions often contain an extended latent defects liability period. Whilst the insurer will not honour the latent defect, the defect may have liability consequences. 

The claims occurring wording may respond subject to the original limit of indemnity, however, the limit may be insufficient. A limit which you may regard as excessive today, may turn out to be a wise decision in five years’ time. 

Please contact your Broker directly, who will then approach Consort to assist with your requirements.

Consort Technical Underwriting Managers (Pty) Ltd (FSP 2273) underwritten by Lombard Insurance Company Limited (FSP 1596) an Insurer licensed to conduct non-life insurance business.