One of the really important things to understand with professional indemnity insurance (PI) is retroactive cover.

(Just as a quick reminder – professional indemnity insurance protects you and your business against claims for alleged negligence or breach of duty in your professional services.)


Retroactive cover can be a life saver

Retroactive cover is a really cool device.  It protects you from claims for work that you did in the past and before your current policy started.

How does this work?

As an example, say you’re a management consultant.   During 2013 and 2014 you consult for one of the four major Australian Banks.  With your project completed, the following year in 2015 you contract to the Federal Government.

Also during 2015, you receive a “not so nice” surprise.  Your old client, one of the four majors, decides to make a $1m claim against you for your professional work way back in 2013.  Oh my goodness! After the shock and awe of internalising the implications here on your own and your company’s financial health, the question will be – are you covered?

You could be.

First up though, a few things need to be in place (headline – this is the important part):

  1. Retro-active cover is in place in your current PI policy (Sherpa Insurance has this) AND
  2. There are no time breaks between your old policy and your new one AND
  3. When you took out your current policy, there were neither claims nor suspicions (hints) of a claim.

Although, it is easy to ensure that these things are in place…it is just as easy to leave one of them out.

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