It is to be hoped that all readers of this journal have obtained and carefully read the GISC consultation papers and made whatever comments they felt appropriate.
One thing the code framers could usefully do is consult with professional indemnity insurers to find out where problems actually arise in practice, rather than the perception of problems in a vacuum.
Our casebook suggests that one area that could be usefully addressed is under insurance and the application of "average".
When applied to complex covers, which are often little understood by either the client or the practitioner, often client dissatisfaction results.
An example came in a business interruption policy, where the intermediary persuaded the client to purchase this cover.
The advice given to the client was that the accountants on the last financial year report should indicate the gross profit.
The figure should include wage roll and an allowance for inflation and expansion, not only for the forthcoming insurance year but also the following 12 months.
On that basis, the client confirmed the appropriate sum insured would be £47,500.
A fire occurred at the end of the policy period. Loss adjusters were appointed and recalculated the gross profit at approximately £80,000 and therefore applied a 45% downward adjustment to the claim.
The case has been successfully repudiated, on the basis that the client supplied the gross profit figure and had had the business interruption requirements explained to him at a pre-renewal meeting.
He said that he had been asked what his gross profit figure was and simply stated the bottom line figure. He was not asked what the figure should include or what period it should cover.
The intermediary insisted that the matter was discussed in full at a meeting.
The adjusters were at great pains to attach no blame to the insured and found no reason to doubt the validity of the claim submitted.
The issue over responsibility for the validity of sums insured and the correct ways of calculating them is often an issue.
While no legal liability may attach where the client has got confused and provided wrong information on proposal forms, brokers who wish to keep happy clients would be prudent to ensure that their clients understand the need to give accurate figures, to take professional advice and to understand the consequences of failure.
Interestingly, the insurer would have been prepared to provide a rebate of premium if the estimate of gross profit proved to be over stated, although it seems it is not common practise to request updated declaration as a matter of course.
My guess on this occasion is that the client may well not have been prepared to incur legal fees to prosecute a claim for a relatively small recovery but if it were the cost of a postage stamp to a user-friendly Ombudsman, both the client's decision and the outcome could have been very different
