You've just completed your final project as a freelance consultant and will soon be retiring to the beach. No more commuting, deadlines, or tedious management meetings. You've had a great career, been fortunate enough to make some money along the way and now after 25 years of freelancing are looking forward to living the good life.
Before you close shop, you'll want to make sure that no-one can ruin your retirement. In particular all those people you've worked for over the years. You may be surprised to learn that when you retire liability for your past actions don't cease. You can still be stung by costly claims of negligence years after services are completed.
Fortunately there is a simple and cost effective PI insurance solution that protects your business after it has ceased trading. Its called 'Run Off Cover'.
What Is Run Off Cover ?
Run off cover is a professional indemnity policy which provides cover after you have closed your business. It provides useful protection when you no longer need to be covered for new work, but still need professional indemnity to cover possible future claims.
Why Is Run Off Cover Necessary?
Professional indemnity insurance is underwritten on a 'claims made' basis rather than an 'occurance' basis'. Under a 'claims made' policy coverage is provided only for claims reported to insurers during the policy period. It does not provide cover for claims made after the period of cover expires. (even where the event giving rise to the claim occured during the period of insurance).
So if for example you worked on an engineering project, retired and then one year later a claim was made against you the professional indemnity policy you held at the time would not protect you. Run off cover would. (providing the claim occured during the period of run off insurance.)
Run Off Cover - How Long?
Its difficult to suggest the period of time that run off cover ought to be taken out. Cover should be continued until you are comfortable that there is no longer any likelihood of problems with your work.
Generally, the limitations period for bringing claims in tort is six years from the date of the incident/accident and in contract, six years from the date of the breach of the contract.