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Professional Indemnity for Pharmacists

Professional Indemnity and Legal Expenses Insurance for Pharmacists

Professional Indemnity Insurance – what is it?

Professional Indemnity Insurance for the Pharmaceutical Industry (PII) is a type of liability insurance that provides cover for losses suffered by your customers as a consequence of a professional’s neglect, error or omission. Professional Indemnity Insurance also covers the legal costs and expenses incurred in the defence of any claim. Professional Indemnity Insurance is the most important insurance policy to Pharmacists and it is vital it includes all unintended breaches of professional duty including giving advice, failure to give advice and dispensing errors.

A pharmacist who is providing advice owes a duty of care to their customers. The standard of duty of care is the provision of “reasonable skill and care”. If a Pharmacist falls below this standard and causes a loss, they may be viewed as being negligent and may be held liable for any subsequent losses incurred. The world is becoming more and more litigious and as such when an error is made the injured party must be compensated. It is for this reason PII is a necessity.

Types of Professional Indemnity Insurance

All PII policies run for one calendar year. There are two types of Professional Indemnity Insurance and the differences between the two types are very important to consider when making a claim and when changing Insurance Provider.

Professional Indemnity – Claims Occurred

The first type of Professional Indemnity policy is a policy written on a Claims Occurred Basis. This means that the wrongful act, injury or mistake must occur during the period of the insurance policy, but can be reported to the Insurance Company at any time, even after the policy expires.

Professional Indemnity – Claims Made

The second and most popular type of Professional Indemnity policies is written on a Claims Made Basis. This means that the wrongful act, injury or mistake can happen during or before the policy was incepted. For the benefit of clarity an incident which occurs prior to the date of the policy is covered by this policy if the claim is validly made during the period of cover of the policy.

Moving Policy from Claims Occurred to Claims Made

The most important factor to check before moving a policy from claims occurred to claims made is whether a retroactive date applies to a PII policy written on a claims made basis. Many policies have no retroactive date but nonetheless it is important to check because a retroactive date functions as policy exclusion. It excludes cover for an incident that occurred prior to the retroactive date.

To illustrate why this “No Retroactive Date” clause is so important, I will use the following example.

Case 1 Case 2
Retroactive Date on Policy: June 1, 2012 No Retroactive Date
Policy Start Date: June 1, 2014 June 1, 2014
Claim Made: July 1, 2014 July 1, 2014
Date Incident Occurred: June 1, 2011 June 1, 2011

Advantages of Claims Made Basis:

  1. The premiums are generally lower because insurers do not need to provide for claims that may occur many years into the future;
  2. There is cover for claims that occur before the period of insurance;
  3. The Insured does not need to keep their policy records indefinitely;
  4. The likelihood of the Insurer ceasing to trade before the claim is made is minimal;

What happens to my Professional Indemnity Cover if I retire or sell my business?

It is necessary to ensure that you have Tail or Run-off cover in the event of sale of business or retirement. This cover is easily purchased and covers any claim that may arise after retirement or sale of business.

That said, we are delighted to be able to reassure you after three years of continual cover, our policy will extend to claims where the incident occurs during the period covered by the policy but where the claim was made after termination of the policy. In effect, this means that in the event of you retiring or selling your business, you will not have to be concerned about future claims and it will not be necessary to continue paying for a professional indemnity policy.

What is Legal Expenses Insurance?

This is an insurance policy which covers your legal cost as a result of an action brought against you by an individual, institution which is not generally covered by your PII. An example would be an unfair dismissal claim or appeal against a suspension by a statutory body.

Do I need Legal Expenses Insurance if I have Professional Indemnity Insurance?

This is an optional insurance which is required if you want cover for legal costs for statutory licence appeals, employment disputes, and a helpline. The normal limit of indemnity is €150,000 per claim and €1.5 million per year.