Professional Indemnity is written on a ‘claims made’ basis meaning the policy will need to be live on the date that any claim against you is presented. If you were holding insurance at the time you completed the work/contract but allowed your policy to lapse you would not be covered in the event of a claim.
As an example: as an IT contractor, you completed an IT project for a client in 2017; however, now there is a system error which causes your client to lose money. As a result, they file a claim against you for negligent work. In this instance, the live policy you hold will respond to the claim, not the policy you held back in 2017 when you completed the work.
The length of the “run-off” as it is referred to, covers several years after you complete the work or contract. For details of run-off timescales, see the claims periods list later in this article.
The Limitation Act of 1980 specifies the limitation periods which apply to ‘simple contracts’ and deeds. The Act allows actions for a breach of contract and tort, such as negligence, to be brought within a period of six years under a simple contract and twelve years for a more formal deed.
Under English law, a ‘simple contract’ is one which is executed with one signature only. A deed is a more formal contract or document which has more than one signature – for example, a contract that must be signed by two directors on behalf of a company.
The claims periods are as follows:
|Claims in relation to:||Number of years:|
|Recovery of land||12|
|Awards in arbitration||6|
|Debt arising under statute||6|
|Breach of trust||6|
|Defamation and malicious falsehood||1|