We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
24 November 2009
The Supreme Court has provided significant guidance on the scope of application of professional indemnity insurance policies.(1)
An employment consultant was sued by a client who claimed that the consultant had been negligent in the drafting of a lease agreement. The consultant defended the claim and joined his professional indemnity insurer to the proceedings, seeking indemnification under his policy.
The insurer appeared before the court and denied coverage. It argued that the drafting of lease agreements is not part of the typical activities of an employment consultant, whereas the policy was intended to cover only such liability as would arise from the performance of the consultant's typical activities (ie, offering assistance in employment matters and related services).
The Supreme Court ruled that anyone may draft a lease agreement, since this is not an activity that is reserved for certain professionals, such as employment consultants. Therefore, a claim arising from the drafting of a lease agreement does not fall within the scope of application of a professional indemnity policy covering claims arising from the typical activities of an employment consultant.
The decision appears to be based on a particularly strict interpretation of the law, although it may have been influenced by the specific wording of the policy in question, which presumably set a strictly limited scope of coverage. However, the decision provides useful guidance on the interpretation of the insurance cover provided by professional indemnity policies.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.