Retiring, selling a business or stepping away from professional practice marks a significant milestone. However, for surveying professionals, finishing work does not necessarily mean all professional liability risks have ended.
Survey reports, measurements, plans and advice can continue to affect projects long after a surveyor completes the work. If a client later alleges an error or omission caused a financial loss, a claim may arise years after the original service.
At ACSIS Ltd, we understand the importance of helping surveying professionals consider their insurance needs throughout their careers, including when planning retirement or a change in business ownership.
Run-off cover is an important consideration for surveying professionals who are retiring, selling their business or ceasing practice. Understanding how it works and discussing the available options with your insurance broker can help you make informed decisions about your ongoing professional liability exposure.
What is run-off cover?
Run-off cover is a form of professional indemnity (PI) insurance designed to address eligible claims made after a business stops providing professional services. These claims must relate to past work and satisfy the policy’s terms and conditions.
Unlike an active PI policy that may cover ongoing professional activities, run-off cover focuses on potential claims arising from work completed before the business ceased its relevant operations.
For surveying professionals, this may include allegations relating to previous survey work, reports, measurements or other professional services, depending on the policy wording.
Why can claims arise after a surveyor retires?
Professional negligence allegations do not always emerge immediately after a project finishes. A client may discover an alleged error only when a property is developed, construction progresses or another professional reviews the original work.
For example, a surveying business may have completed a survey several years earlier. During a later development, a discrepancy is identified, and the client alleges that the original survey contributed to project delays or financial losses.
Even if the original business has since closed, the former business or relevant professional may still face a claim.
Professional indemnity insurance commonly operates on a claims-made basis. This means the timing of the claim and its notification to the insurer can be critical, rather than simply when the original work took place.
Without appropriate cover in place, a former business may face uncertainty about whether insurance will respond to a claim relating to its past work.
When should surveying professionals consider run-off cover?
Run-off cover is worth discussing with your insurance broker when planning a significant change to your business or professional activities.
Consider reviewing your arrangements if you are:
- Retiring: You intend to stop providing surveying services permanently.
- Selling your business: Ownership is changing, and you need to understand how existing insurance arrangements will be affected.
- Closing your practice: Your business is ceasing operations, but claims relating to previous work may still arise.
- Merging with another business: You need to clarify how historical liabilities and existing PI insurance will be handled.
- Changing your professional activities: You plan to stop offering particular services or move into a different role.
These changes can affect the insurance arrangements available to you. Do not assume that a buyer’s insurance policy or a new employer’s PI cover will automatically protect you against claims relating to your previous work.
Discuss the proposed change with your broker before cancelling or allowing your existing policy to expire.
How long should run-off cover last?
There is no single run-off period that suits every surveying business. The appropriate duration depends on factors such as the nature of the professional services provided, contractual obligations, relevant legal requirements, policy terms and the availability of insurance.
When reviewing your options, consider:
- The duration of cover: Understand how long the proposed policy will remain in force and whether an extension is available.
- The retroactive date: Check how the policy treats work completed before a particular date.
- The indemnity limit: Confirm whether the available limit is appropriate for your potential exposure and whether defence costs reduce that limit.
- The scope of cover: Verify which past professional services and entities the policy covers.
- Notification requirements: Understand how and when you must notify the insurer of a claim or a circumstance that may lead to one.
Do not assume that a short extension or automatic run-off provision provides the same protection as a longer-term arrangement. Check the actual policy wording and obtain advice from your broker.
Five steps to take before leaving your business
Planning ahead can help you make informed decisions about your insurance arrangements.
1. Speak to your broker early
Tell your broker about your retirement, proposed sale or business closure before making changes to your existing policy. This gives you time to investigate available options.
2. Review your existing PI policy
Check the policy’s terms, retroactive date, indemnity limits and any provisions relating to cessation of business or run-off cover.
3. Understand your historical exposure
Review the professional services you have provided, the projects you have completed and any contractual obligations that may continue after you leave the business.
4. Clarify arrangements when selling or transferring a business
If you are selling your practice, establish how the sale agreement addresses past professional liabilities and insurance responsibilities. Do not assume the transfer of ownership automatically transfers insurance protection.
5. Keep relevant records
Maintain appropriate records of completed projects, reports, contracts, policy documents and insurer notifications. Ensure you understand how these records can be accessed if a claim arises in the future.
How ACSIS can help surveying professionals
Planning for retirement or a business transition involves more than deciding when to stop working. It is also an opportunity to review your existing insurance arrangements and consider how claims relating to past professional services may be handled.
As a member-based insurance society supporting surveying professionals, ACSIS encourages members to review their professional indemnity arrangements before making significant changes to their business or practice.
If you are considering retirement, selling your surveying business or ceasing professional services, consider discussing the following with your insurance broker:
- Whether your current professional indemnity policy provides any run-off provisions.
- What options may be available to maintain cover for eligible claims relating to past work.
- How your proposed retirement or business sale may affect your existing insurance arrangements.
- Whether your current indemnity limits and policy conditions remain appropriate for your circumstances.
Every situation is different, and the availability and terms of run-off cover depend on the relevant policy and insurer. Your broker can help you understand the options available to you.
Plan ahead to protect your professional legacy
Retirement and business transitions require careful planning, including consideration of the professional risks that may remain after you stop trading.
Run-off cover may form an important part of that planning by providing protection for eligible claims arising from past professional services, subject to the policy’s terms and conditions.
ACSIS encourages members approaching retirement, selling their business or ceasing professional practice to review their professional indemnity arrangements with their insurance broker before making changes to their existing cover.
Taking the time to understand your options can help you make informed decisions about managing your professional liabilities into the future.