In simple terms, a full civil liability policy covers more.
Yes, that means you’ll pay more. But as we know, there’s more to buying professional indemnity insurance than just the price tag.
There’s an easy way to put this: if a claim isn’t specifically excluded, it’s included.
That means if you’re found liable for compensation, damages or costs in a civil court because of your advice or professional services, you’re covered – even if you can’t see that you are.
This matters because rules and regulations change all the time and new acts of parliament are passed almost on a daily basis. As a business owner, can you name all of them? Can you name any of them?
A full civil liability policy gives you cover for the risks you didn’t know you faced.
And a negligence only policy? How does that fit it?
Well, it’s cheaper for a start – but that’s largely because it only covers what’s defined in the policy wording.
In other words: if a claim is not specifically included, it’s excluded.
Among other differences (which we’ll get to shortly), it means cover is restricted. But don’t get too hung-up about this because for most professionals the cover is still enough.
Let’s say you buy £250,000 professional indemnity insurance.
Let’s also say that you’re unlucky enough to have two claims made against you in a year; one for £175,000 and one for £85,000. That’s a total of £260,000.
How far does your £250,000 go?
With a full civil policy, the level of cover you choose applies to each claim you make. Lovers of insurance jargon refer to this as any one claim or each and every claim.
In this example, it means both claims would be paid out in full because each one falls below the limit of cover. Essentially, your insurer deals with them individually.
With a negligence only policy, the level of cover applies to each claim and the total of all claims you make. Those same insurance jargon devotees refer to this as in the aggregate.
In this example, it means your policy will only ever pay out a maximum of £250,000 in a year, regardless of the number of claims. The £175,000 claim will be settled but it only leaves £75,000 to pay the claim of £85,000.
So you’re left picking up the tab for that last £10,000. Ouch.
Both negligence only and full civil liability policies cover your legal bill if a claim goes to court.
But the way each one pays your costs differs.
With a full civil policy, defence costs don’t eat into your level of cover. They’re paid on top of any compensation and to the same level of cover as the overall policy (in this case, £250,000. That’s a lot of solicitor’s hours). You might hear this referred to as a costs in addition policy.
Negligence only policies include legal costs in the overall level of cover. The policy has to pay your solicitor’s bill and any compensation to your client from, in this case, that pot of £250,000. This is called costs inclusive.
Now, all of this sounds rather dramatic but, really, we’re not trying to scaremonger. It’s unlikely the differences we’ve seen here will leave you high and dry. But claims do happen and you need to be aware that some polices aren’t as comprehensive as others.
Remember this: the type of cover you have is as important as the level of cover.
That’s why we always recommend you check that your policy covers what your business needs.
Every business is different and there’s no one-size-fits-all policy. If you’re shopping around, the lowest price shouldn’t be the only thing to focus on. You really do get what you pay for.
No one wants to pay over the odds, obviously, but don’t let hindsight be the one to teach you the difference between cheap and good value.
Find out about medical malpractice insurance here, our standard policy cover.