Various insurance policies are written on a ‘claims made’ basis. This means that they will only respond to claims which are made against an insured and notified to the insurer during the policy period, irrespective of when the work was performed by the insured. If the policy expires, no additional claims can be made under the policy.
There is a potential for claims to be made against an insured after a business is wound up or a project is finished. If a claim is made at a time in the future and there is no insurance policy in place there would be no protection for the insured. This is where a run-off insurance policy can prove to be very valuable.
A run-off insurance policy can be purchased prior to cessation of the business or finalisation of a project. It will provide coverage to an insured for future claims made against them which arise from acts, errors or omissions which occurred prior to the inception of the run-off policy. Run-off policies can be purchased on an annual basis or a multi-year basis with one upfront premium payment.
The following policy types are generally written on a claims made basis and run-off insurance should be considered if ceasing business or finishing a specific project.
- Professional Indemnity
- Management Liability
- Associations Liability
- Directors’ & Officers Liability
- IT Liability
BUT, THERE IS NO COMPANY TO SUE...WHY DO I NEED IT?
- Individuals can be held liable for their negligent actions as professionals, principals, partners, directors, officers and employees even if a company no longer exists.
- Obligations agreed to under contracts & deeds signed by the company can survive the life of the company and attach to individuals.
- Some sale agreements require entities to purchase run-off insurance to cover past liabilities.
WHAT TO FIND OUT MORE ABOUT HOW IT WORKS? Check out our info sheet HERE
Berkley Insurance Australia is a registered business name of the Australian branch of Berkley Insurance Company (ABN 53 126 559 706). Berkley Insurance Company is authorised by the Australian Prudential Regulation Authority as a general insurer to conduct new or renewal business.
The information and opinions contained in this document are general in nature. You should consider what insurance is appropriate for you or seek independent insurance advice.