Professionals can protect themselves against claims in respect of a breach of professional duty with an appropriate professional indemnity insurance policy but with the option of a full civil liability based policy or a negligence based policy it is important to recognise what the difference between the two bases of cover are.
Civil Liability vs Negligence in Simple Terms
The professional indemnity insurance policy is designed to protect the policyholder against claims made against them arising from the provision of a professional service, this applies to both civil liability and negligence based policies.
The main difference between the two types of policy is that a negligence based policy provides specific detail on what is covered under the policy, this could be negligence only or there may be specific extensions to cover for example unintentional breach of copyright. In the event of a claim the question becomes “Is this covered under the policy?”
Under a full civil liability professional indemnity insurance policy the cover provided is in respect of the insured’s civil liability but will list exclusions to cover. If the insured is found legally liable then the question is “Is this claim excluded from the policy?”
Whilst the cover under a negligence based policy with a range of exceptions may in fact appear to be similar to a civil liability policy an additional benefit of the latter is that the policyholder will automatically be covered in respect of changes in legislation or regulations that may be introduced in the policy year without the need to amend their policy cover.
This shift in emphasis is extremely important and is the reason that the cover provided by civil liability policies is considered wider than its negligence based counterpart. This is a generalisation, albeit a correct and worthy one, as of course in order to provide a direct comparison you would have to review both policy wordings, including extensions and exclusions for an individual client.
Limits of indemnity under civil liability policies and negligence based policies.
The limit of indemnity under the policy is the insurer’s maximum liability in respect of claims, this limit can specified as “each and every claim” or “any one claim and in the aggregate”. The each and every basis is preferable. (more)
Generally policies written on a civil liability wording are based on an each and every claim basis, whilst contracts based on negligence are generally on an any one claim and in the aggregate basis. This is not an absolute rule and there is no reason why either policy could be written on either of the two bases. You need to check the details of your own individual policy or quotation to be certain.
Which is the best professional indemnity policy civil liability or negligence based?
In general terms the civil liability policy on an each and every claim would provide you with the widest and highest level of cover but again this depends on your own individual circumstances and the details of the quotations that your receive.
Professional Body Insurance Requirements
As the cover provided by a civil liability wording is naturally wider that that provided by a negligence based wording you will find that when professional bodies require members to hold professional indemnity insurance as a condition of their membership or compliance then it will often be specified that the policy must be written on a civil liability basis.