Professional indemnity conditions: staying on the right side of your policy

Why professional indemnity conditions matter

Professional indemnity insurance exists for one kind of claim: a client says your advice, design or service cost them money. Unlike a burst pipe, that claim can arrive years after the work, arrive as a vague complaint long before it becomes a demand, and be defended or lost on documents you wrote at the time.

That shape is why PI wordings put so much weight on timing and conduct: when you knew, when you told the insurer, what you said to the client in the meantime, and what the contract you signed promised. The cover can be excellent and still not respond if the conditions around it weren’t met.

Australian law helps at the edges. The Insurance Contracts Act generally limits an insurer’s ability to refuse a claim because of something you did or didn’t do after the contract started, to the extent it actually prejudiced the insurer. But that is an argument about how much a claim is reduced by, not a reason to leave the conditions to chance. Several PI wordings build the same idea in directly: Chubb’s continuous cover extension, for example, reduces cover by the amount that “fairly represents the extent to which the Insurer’s interests were prejudiced” by a late notification (2.4).

The three PI wordings we read

We read three Australian professional indemnity wordings written for consultants and other “miscellaneous” professions, each downloaded from its insurer’s own website. Where we quote them below, the words are theirs, with the clause reference.

Profession-specific wordings (for accountants, engineers, architects or financial advisers) often differ from these, and regulated professions can have minimum terms set by their professional body. Limits, excesses and retroactive dates live in each policy’s schedule, which isn’t published.

Before you buy: what you tell the insurer

All three wordings reproduce the duty of disclosure under the Insurance Contracts Act: tell the insurer anything you know, or could reasonably be expected to know, that may affect its decision to insure you and on what terms. The duty applies again at every renewal, extension or variation.

Chubb’s insuring clause is explicit about what the proposal becomes:

“statements made in the Proposal and materials accompanying it, which it is agreed shall form the basis of this insurance”Chubb, Elite III Miscellaneous PI Ed. 04/21, preamble

DUAL defines the proposal to include “all other supporting documentation and attachments provided to us in the application” (6.33). In practice, the answers most PI proposals ask for (your services, your fee income split by activity, your largest contracts, any claims or complaints, and anything you are aware of that could lead to one) are the facts the policy is priced and written on.

The wordings differ on what happens when something was missed. DUAL is generous: it agrees “not to rescind or avoid this policy in whole or in part, for any reason”, and waives its rights for non-fraudulent non-disclosure (8.13). Chubb and Delta both treat the proposal as separate for each insured person, so one partner’s non-disclosure isn’t held against another who knew nothing of it (Chubb 6.11, Delta 6.3). These protections are valuable, but none of them is a substitute for telling the insurer about a dispute you already know is brewing.

Chubb’s notices add one more obligation that runs for the life of the policy: to advise Chubb “as soon as reasonably practicable of any change to your normal business as disclosed”.

The services you declared are the services you’re covered for

This is the condition people most often don’t realise they have. PI doesn’t cover everything you do; it covers the professional services described in your schedule. All three wordings tie cover to that description:

“Professional business means the professional activity(ies)/business description specified in the schedule only.”DUAL, Consultants PI 11.20 v3, definition 6.32

Chubb defines professional services as “the activities of the Company shown in Item 4. of the Schedule” performed for a client for a fee (7.36), and Delta as the services “specified in Item 1C of the Schedule” (7.42). DUAL goes on to exclude “any act, error or omission in the conduct of any activity not part of the policyholder’s professional business”.

The practical risk is drift. A marketing consultant starts building websites; a bookkeeper starts giving tax structuring advice; an engineer starts project-managing construction. Each new line can sit outside the description the insurer agreed to. The fix is simple and cheap: tell the insurer, and have the description updated, before the new work starts.

Claims-made cover and the retroactive date

All three wordings are written on a claims-made and notified basis. Delta’s important notices put it plainly: the policy “will only apply to Claims first made during the Policy Period or Extended Reporting Period, if applicable, and notified to Delta in writing” in that time. The policy in force when the claim is made is the one that responds, however long ago the work was done.

The retroactive date limits how far back that goes. DUAL covers liability “arising from conduct of the insured occurring after the retroactive date” (2.4); Chubb won’t cover a claim where the services were provided “before that Retroactive Date” (6.6); Delta excludes services “performed or alleged to have been performed prior to the Retroactive Date” (4.19). If your schedule shows a retroactive date that is later than when you started trading, work before that date is outside the policy.

Continuous cover

What if you knew about something last year and didn’t notify it? All three wordings have a continuous cover extension that can pick up facts that could have been notified under an earlier policy, but only on conditions. DUAL requires that it was your PI insurer when you first became aware “and have continued, without interruption” since, with no fraudulent non-disclosure (3.5). Delta requires you to have been “continuously insured, without interruption, under a Prior Policy” (2.4). Chubb’s version reduces cover for any prejudice the late notice caused (2.4). The common thread: a gap in cover, or a change of insurer, can switch this protection off.

Notifying circumstances: the rule that saves claims

Section 40(3) of the Insurance Contracts Act is the most useful single rule for anyone with PI cover, and every wording we read explains it. In DUAL’s words:

“if you give notice in writing to us of facts that may give rise to a claim against you as soon as reasonably practicable after you became aware of such facts but before the policy expires, then we will continue to be liable under the policy for that claim, if made”DUAL, Consultants PI 11.20 v3, important notices

In plain terms: a client complains, goes quiet, and sues eighteen months later. If you notified the complaint in writing while the policy was running, that policy stays on the hook, even though the claim arrived after it ended. If you didn’t, the new policy will usually exclude it as a prior known matter, and the old one never heard about it. Chubb’s notice adds that the right “does not arise unless the notice in writing is given before the Policy expires”.

What should the notice say? DUAL’s claims condition gives a useful template:

“a) the identity of the claimant if relevant; b) an outline of the factual matrix; and c) an estimate of the likely quantum”DUAL, Consultants PI 11.20 v3, clause 7.1

It doesn’t need to be long or legal. Who, what happened, and roughly how much is at stake is usually enough to start. Renewal is the natural moment to check nothing is sitting unreported.

When a claim arrives: notify fast, in writing

A “claim” in a PI wording is usually broader than a lawsuit: a written demand, a letter of complaint seeking compensation, or a notice of proceedings can all count. The notification requirements are similar across the three:

• DUAL: notify in writing “as soon as is reasonably practicable after they first become aware… and within the insurance period” (7.1).
• Chubb: written notice “as soon as reasonably practicable, but always no later than ninety (90) days after the expiry of the Policy Period” (5.1(a)).
• Delta: claims must be first made and notified to Delta in writing during the policy period or any extended reporting period.

If your policy was placed through a broker, tell them too; handling the insurer is part of the job. How claims work with Gary sets out what we do from there.

Consent before you admit, offer, settle or spend

This is where good relationships with clients and good PI cover pull in opposite directions. Your instinct may be to fix it, apologise, or offer a discount. Every wording asks you to stop first:

“The insured will not admit liability, settle any claim, make any admission, offer any payment or assume any obligation in connection with any claim or investigation, incur any defence costs… without our prior written consent”DUAL, Consultants PI 11.20 v3, clause 7.5

Chubb says it “is not liable to indemnify any Insured for any settlement, admission, offer, payment or assumed obligation unless the Insurer provides its prior written consent”, and that you must not incur defence costs without consent (5.2). Delta requires you not, “without Consent, admit or assume any liability for, offer to settle or settle, any Claim or incur any Defence Costs”. The consent is generally “not to be unreasonably withheld”, so asking rarely slows you down much; not asking can cost the claim.

Refunding a fee is a common trap. It feels like good service, but it can be read as an admission, and it is a payment made without consent. The same consent rules run through cyber insurance conditions too, where they bite in the first hour of an incident.

When you and the insurer disagree about settling

Sometimes the insurer wants to settle a claim you believe you could win, and your professional reputation is on the line. PI wordings handle this with a “Senior Counsel” clause: an independent barrister decides. Chubb’s is typical:

“neither the Insurer nor the Insured will require the other to contest the Claim or Investigation unless a Senior Counsel, or equivalent, (to be mutually agreed) recommends that the Claim or Investigation should be contested”Chubb, Elite III Miscellaneous PI Ed. 04/21, defence and settlement condition

The insurer pays for that advice, and the barrister can weigh legal and commercial considerations. Delta refers disputes to Senior Counsel too, and you are not required to contest proceedings unless counsel advises they can be contested with a reasonable prospect of success (5.4).

The catch is what happens if you refuse a recommended settlement. Chubb limits its liability to “the amount for which the Claim or Investigation could have been settled, plus the Defence Costs or Legal Representation Expenses incurred up to the date the refusal to consent was made”. Delta’s limit is the amount the claim could have been settled for plus defence costs to the date you elect to contest (5.4). You can still fight; you do so at your own risk above that figure.

The contracts you sign can shrink your cover

PI covers the liability the law places on you for professional negligence. It generally doesn’t cover extra liability you volunteer for in a contract. All three wordings exclude it:

“any actual or alleged liability assumed under any contract, agreement or understanding except to the extent that such liability would have attached to the Insured in the absence of such contract”Chubb, Elite III Miscellaneous PI Ed. 04/21, exclusion 4.1

DUAL’s exclusion 5.4 is to the same effect, with a carve-back for confidential information. Delta’s is broader: it also excludes “any express fitness for purpose term in any contract” and delay in performing or completing services unless it arises from a breach of professional duty (4.3). Delta then gives some back: its contractual liability extension covers liability under an indemnity or hold harmless clause “to the extent that such civil liability results from the Insured’s performance of Professional Services” (2.5), and it disapplies the exclusion where you have contracted out of proportionate liability laws (3.3).

Clauses worth reading twice before you sign

• Indemnities that make you responsible for the client’s losses regardless of fault
• Fitness for purpose promises, which go further than doing the work with reasonable care
• Guarantees of outcomes, timeframes or savings
• Waivers of proportionate liability, which can leave you paying for others’ share
• Unlimited liability, where a cap tied to your fees or your PI limit is common elsewhere

None of these makes a contract unsignable, but each can move risk from your insurer back to you. A broker can tell you how your own wording treats a clause before you agree to it.

The PI exclusions worth knowing

The injury exclusion is why many service businesses hold both PI and public liability: one responds to financial loss from advice, the other to someone being hurt or property being damaged. Our PI vs public liability guide sets out where the line falls.

Limits, defence costs and reinstatement

How the limit works changes how far a policy stretches in a bad year. Three things are worth checking in any PI schedule and wording:

• Whether defence costs are in addition to the limit. DUAL pays defence costs “in addition to the indemnity limit, but only up to an amount equal to the indemnity limit” (2.2). Delta’s are “payable in addition to the Limit” (2.6). Where costs are inside the limit instead, legal fees eat into what is left for the claim itself.
• Reinstatement. All three restore an exhausted limit once in a policy period, on conditions (DUAL 3.22, Chubb 2.15, Delta 2.15).
• Related claims. Claims arising from the same or related conduct are generally treated as one claim, with one limit and one excess (DUAL, for deductibles; Chubb 5.3). Ten clients affected by one flawed template may be a single claim.

Useful extensions also sit here. Chubb covers liability for the “damage, destruction, deletion or loss of Documents” you are responsible for (2.12). Delta pays the cost of replacing lost documents, but not where the loss comes from a “computer virus, spyware, malware or other electronic attack” (2.16). That is cyber insurance territory, and a good example of why the two covers are bought side by side.

Stopping work, selling up and run-off cover

Because PI is claims-made, the day you retire, close or sell is not the day the risk ends. A claim about work from three years ago can still arrive, and if no policy is in force, nothing responds. The wordings offer a few tools:

• Discovery periods after a policy ends: DUAL grants 90 days automatically, or 12 months if requested within 30 days and paid for (3.10); Chubb gives 45 days at nil premium on non-renewal (2.6); Delta 30 days if it doesn’t renew or cancels (2.7).
• Run-off after a business ceases or is sold: Chubb continues cover to the end of the period for past work, and may, at its discretion, extend it for up to eighty-four (84) months for an additional premium (2.16).

Many professionals keep a run-off policy for several years after they stop working, and some professional bodies set minimum periods. If a sale or retirement is coming, raising run-off before the last renewal is far easier than after the policy has lapsed. Our brokers can talk it through.

Want to test yourself on all of this? The Friday Letter Test takes you from the proposal to a letter of demand in ten decisions.

A professional indemnity checklist

Drawn from the conditions above. It is not a substitute for your own wording, which may ask for more, or less.

Questions people ask about PI conditions

Sources

Policy wordings, read in full in September 2026:

• DUAL Australia, Consultants Professional Indemnity (Wording 11.20 v3)
• Chubb Insurance Australia, Elite III Miscellaneous Professional Indemnity (Ed. 04/21, Chubb10-567-0421)
• Delta Insurance Australia, Miscellaneous Professional Indemnity (Delta PI 01/24)

Law:

• Insurance Contracts Act 1984 (Cth), Federal Register of Legislation (sections 40 and 54)

More plain-English reading in Gary’s guides.