Professional indemnity insurance and public liability insurance are two policies that every real estate business needs. But do you understand the difference in coverage?
Professional indemnity insurance specifically relates to breaches of your professional duty. It protects you and your business against claims for alleged negligence or breach of your professional duty arising from an act, error or omission in the performance of professional services.
Public liability insurance, on the other hand, covers your business for third-party property damage or personal injury as a result of your business activities, which falls outside your professional service provision.
Let’s walk through a couple of examples to illustrate the difference.
You’re hosting an open home and have placed an ‘open for inspection’ sign at the front of the property to attract the attention of interested buyers. While admiring the front façade of the property, someone trips over the sign, falls and injures themselves.
The injury was the result of the person tripping over the sign. Was the sign placed there as part of your professional service? Yes, it was. Conducting an open home is a professional service that you, as the Agent, are paid a fee by the vendor to carry out. Therefore, the act of putting the ‘open for inspection’ sign out is directly linked to that professional service.
This type of claim would fall under your professional indemnity insurance policy.
You have a real estate agency and a person comes into your office because they’re interested in selling their home, but aren’t sure how to start the process. Upon entering, they trip over the mat in the office foyer and injure themselves.
The injury is the result of tripping, as was the case in the first example. However, in this case having a mat in the foyer of your agency doesn’t directly relate to the provision of your professional services.
This type of claim would fall under your public liability insurance policy.
Let Realcover protect your business
Realcover’s professional indemnity insurance policy has been designed with your needs in mind. For more information and to discuss your insurance needs, please contact Realcover by speaking with a Marsh representative on 1800 990 312 or email firstname.lastname@example.org
Claims made versus occurrences
The other notable difference between the two types of policies is that professional indemnity insurance is written on a ‘claims made’ basis. The policy covers incidents that you report during the active policy period (or an extended reporting period as defined by the policy wording) and occur after the policy’s retroactive date. This means the claim or circumstance that you believe may give rise to a claim under the policy must be notified to the insurer in the policy period, or you become aware of it. Even if, years later, a claim arises and legal action is taken against you, it will be the policy in place at the time you are first made aware of the claim or circumstance which would respond (subject to terms and conditions of the policy wording). The insurer has grounds to reduce or deny the claim if you were aware of the potential claim or circumstance and did not notify your broker or insurer during that policy period.
On the other hand, public liability insurance is written on an ‘occurrence’ basis. This means the policy covers losses that take place during a specific coverage period, regardless of when an incident is reported. The policy in place at the time an incident occurred is the policy that will respond.
There are commonly grey areas in claims scenarios, so if you have any concerns or queries, or if you wish to talk through a potential circumstance that may give rise to a claim under your Realcover professional indemnity insurance policy, please contact the Realcover team on 1800 990 312. The team are also happy to assist with a quote for public liability insurance if required.
This article contains general information only and does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. All advice given by the Realcover team is general advice only. Realcover is an insurance product arranged by Marsh Advantage Insurance Pty Ltd (ABN 31 081 358 303 AFS Licence 238 369) (MAI). MAI is not the insurer. MAI is a business of Marsh and McLennan Companies (MMC). Cover is subject to the terms, conditions, limits and exclusions of the Policy. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements. Copyright © 2021 Marsh Advantage Pty Ltd. All rights reserved.