Question...
If a client is required to increase his public liability limit as the result of work that he is undertaking for a customer, does that increased limit need to stay in place after the work is completed?
We are often asked to increase these limits but only for the period of time that the client may be on site or until the job is done.
I believe that if an occurrence happened resulting in a claim on the policy after the works were completed and the liability limit reverted back to the original figure, then the insurers would be entitled to limit the indemnity figure to the lesser amount at the time of the occurrence. I hope that I have conveyed that clearly.
REPLY... Crossley Gates,
You are absolutely correct and this is a real trap.
As you will know, a PL policy is triggered by property damage occurring during the period of cover for which the insured is then held legally liable for (not when the negligent act occurred). Under the Limitation Act 2010, a cause of action in contract or tort can be brought up to six years after the negligent act or breach of contract occurs (there are a number of exceptions).
This means that the insured is at risk of being held liable for a negligent act that occurred while he or she did the work, up to six years later. If the negligent act results in property damage in say year four, the insured will need a PL policy with the increased sum insured in year four. It is that policy that will respond, not the PL policy when the work was done.
Therefore, an insured that perhaps carries out some work that is unusually large and who seeks extra cover for that work, should carry the extra cover for a minimum of six years after the work is completed.
I am glad you have raised this issue and I hope every broker who reads this takes it on board. Of course, if after you have advised your client of this, your client instructs you not to carry it forward for six years, you are in the clear - just make sure you make a record of your advice and the instruction you received so you can prove it later if need be.
