You don’t want insurance companies to pay fraudsters – especially if they’re using your premium

Have you contributed to Madoff’s legal defence costs?

Not all insurance disputes should be won by the insured, especially if they are fraudulent.

Usually I’m furious when I hear that an insurance claim has been declined. This time I was pleased; Lloyd’s of London successfully defended themselves in a US court when Madoff tried to appeal that Lloyd’s were wrong to cut off the funding of his defence costs.

Lloyd’s had already parted with $4million whilst the legal eagles prepared their cases. They pulled the plug after one of his cohorts pleaded guilty to fraud of one sort or another. Evidence of illegal acts is one of the triggers for insurance problems. Once an allegation is made underwriters will refuse to continue paying defence costs or any damages awarded. Until then, the policy wording (a legally binding contract) meant that they were obliged to pay for defence costs for Madoff, other Directors, Officers and decision makers of the company that purchased the cover.

This may seem odd yet the wording of the contract states that there has to be evidence of fraud, or another type of breach, before insurers can turn off the claims tap. In this case, the reason for the admission of guilt could be anything from a guilty conscience, a shorter sentence, a smaller fine or some form of persuasion that you and I won’t know about – having not been accused of infringing the law or fleecing thousands of innocent investors.

The defence costs are covered if one of the “controlling minds” of a company (or charity) is accused of a “wrongful act” in their duty as a director (or trustee). Breach of fiduciary duties is considered a wrongful act yet it is not covered if illegal or deliberate.

There are loads of other examples of what are considered wrongful acts and surprisingly few exclusions on these policies. That’s because they’re a relatively new form of cover. Over time, as claims that shouldn’t be paid are, underwriters will start to exclude the most common instances. Most policies don’t cover fines or punitive damages. They are there to protect the innocent, not the bloody minded.

So how do you know if you contributed? If you have such a policy with a Lloyds underwriter part of your premium may now be lining the pocket of one of America’s legal eagles. If you see a picture of them when this truly momentus case comes to court (Jacko’s lawyers became celebrities) consider that you might have funded their tie or specs. Which isn’t so bad if they’ve got taste.

You can’t prevent your premium being used to defend people that appear to be crooked yet you can ask your insurance company for a summary of claims they have settled. If you think they’re settling claims that you won’t be making perhaps you can choose an alternative which is more appropriate.

Top Tip: You can defend yourself against your own innocent mistakes and even wrongful acts of your peers. Make sure you don’t turn a blind eye and assume that insurance will protect you. Insurance protects income and reputation if arranged properly. It will not prove useful if things have been ignored or buried.

See our top tips section for simple ways to help yourself today.

Related posts:

1. Professional Indemnity Insurance – Discover how to avoid losses Professional advisers are not always protected by their insurance  ...
2. Insurance Myths – Part 4 To claim or not to claim   I’m often told...
3. Insurers tighten their belts on business claims Jason Cobine of insurance brokers Cobine Carmelson explains why insurance...
4. What is cyber insurance?   Twitter has experienced problems this week. Could it happen...
5. Insurance Myths – Part 2 Employers often ask why insurance companies pay the wrong employee claims.  ...

Professional Indemnity Insurance – Discover how to avoid losses

Professional advisers are not always protected by their insurance

Want to know why some indemnity insurance claims are declined? I have two examples of claims being declined, one more extreme than the other, yet both prove small errors can prove costly. And I’m going to tell you why they were declined and how to avoid it happening.

The first is the most recent, only a few months ago an insurance company refused to cover a claim for a company that was being sued for £47,000. The claim related to an incident that occurred in July 2005 when they had translated a document (allegedly incoorectly) yet it would have been covered if the insurance company had been made aware of it earlier. Read the rest of this entry

Related posts:

1. You don’t want insurance companies to pay fraudsters – especially if they’re using your premium Have you contributed to Madoff’s legal defence costs?   Not...
2. Insurance Myths – Part 4 To claim or not to claim   I’m often told...
3. Insurers tighten their belts on business claims Jason Cobine of insurance brokers Cobine Carmelson explains why insurance...
4. Why is solicitors indemnity insurance so expensive?   Legal eagles will be trying to get the best...
5. Can contractors insurance enhance a reputation?   Here’s a brief explanation of how accidents can happen,...

Discover how your business network can help your clients

Your network can help you keep clients as well as find new ones

Here’s a simple way to add value to your product or service.

From time to time your clients will reach the limit of your product or service. With a good sales and marketing process you will have already set the parameters of where those lines are drawn. However, you can add value if you have worked out who can help your clients where you can’t. Read on for examples. Read the rest of this entry

Related posts:

1. Want to secure cashflow despite bad luck?   Fire risk assessments are not exactly high on the...
2. Health & Safety Inspections – coming soon?   On the spot fines following these inspections have been...
3. Customer Service – Where did it all go wrong?   I recently read an article in a newsletter from...
4. Insurers tighten their belts on business claims Jason Cobine of insurance brokers Cobine Carmelson explains why insurance...
5. Professional Indemnity Insurance – Discover how to avoid losses Professional advisers are not always protected by their insurance  ...

Business Insurance has a hidden weakness – does your policy protect you properly?

Insurance claim departments are taking a hard nosed approach – make sure you’re covered

I recently heard about three businesses who have been robbed of £250,000 assets and their company insurance is not paying out. Today, I heard about another case of a business getting caught out and insurers used terrible judgement to decline the insurance claim.  I am trying to use the information superhighway to show you how to ensure this doesn’t happen to you or people you know that run businesses.

The scene of the crime

Criminals have been climbing into manholes and cutting telephone lines at targeted premises. This triggers the alarm and Police and a member of staff attend the premises. There’s absolutely no evidence of a break-in so the Police and staff withdraw. After everyone has left the premises are then broken into yet the alarm doesn’t sound because the lines have already been Read the rest of this entry

Related posts:

1. Insurance Myths – Part 3 Here’s some handy tips to combat workplace stress   Not...
2. Have you got All Risks insurance? The insurance definition of unattended items is a tricky one....
3. Can contractors insurance enhance a reputation?   Here’s a brief explanation of how accidents can happen,...
4. Want to secure cashflow despite bad luck?   Fire risk assessments are not exactly high on the...
5. Professional Indemnity Insurance – Discover how to avoid losses Professional advisers are not always protected by their insurance  ...

Want to secure cashflow despite bad luck?

Fire risk assessments are not exactly high on the list of priorities for everyone. Some small businesses might think fire evacuation procedures are not important. So spare a thought for the business owner in Scotland who didn’t think a fire would ever affect his organisation.

The business was unlucky enough to suffer a fire and they didn’t have an evacuation procedure, they probably couldn’t find the time to do it – especially as there 101 other things to do every week to keep the business afloat.

The fire brigade arrived yet the absence of an evacuation procedure (which should be tried and tested) meant that no-one at the premises could tell the brigade if anyone was left in the building. Read the rest of this entry

Related posts:

1. Health & Safety Discover how to help your business before your neighbours suffer a...
2. Health & Safety Inspections – coming soon?   On the spot fines following these inspections have been...
3. Insurers tighten their belts on business claims Jason Cobine of insurance brokers Cobine Carmelson explains why insurance...
4. Discover how your business network can help your clients Your network can help you keep clients as well as...
5. Business Insurance has a hidden weakness – does your policy protect you properly? Insurance claim departments are taking a hard nosed approach – make...

Can contractors insurance enhance a reputation?

Here’s a brief explanation of how accidents can happen, the benefits of quality service and how reputations can be enhanced when bad luck turns up.

There seem to be a lot of people damaging windows in Bond Street these days. Not all of them are sinister. Here’s a true story about what can be done to prevent accidents turning into disasters.

A client had the misfortune of damaging the window of a jeweller on Bond Street whilst he was working there. The windows are supposed to be “bullet proof” yet it didn’t stop a sparky’s screwdriver – he was working inside when it happened.

This electrical contractor has a great reputation. Often working at high class restaurants and retail outlets in airports, they have always been careful to ensure they have adequate cover. And they insist we arrange insurance with companies that are willing to help as soon as a claim occurs.

This happened on a Sunday and a call reassured the jeweller that they had adequate insurance and they could order an immediate replacement window because the damage would be covered without admitting legal liability of course. They were able to do this because they understood the claim process and knew who to call to check they had the right cover. How many people can say that?

The new window was installed without delay yet we were asked to intervene when the cost of the glass (£18,000 from Germany) increased because the pound had weakened between the time the order was made and the settlement cheque delivered. We contacted the loss adjuster and they arranged for the increased settlement. And the insurance company benefitted from their willingness to see reason.

The end result was a win for everyone. The contractor had increased his credibility, the jeweller is certain they used the right contractor, the insurance company paid the claim and secured the client’s business for years to come. The insurance company also learned to settle claims promptly or suffer the consequences of currency fluctuations.

These are not the only challenges contractors face, click here for an article highlighting how subcontractors can avoid problems with HMRC.

Top Tip: Always ensure you know your claim process. It’s extra prudent to try the claim reporting number and enquire about the claim process before you buy. And get your broker to check the insurance of anyone working on your premises – you don’t want to suffer a dent to your finances because they haven’t insured themselves properly.

See our top tips section for simple ways to help yourself today.

Related posts:

1. Business Insurance has a hidden weakness – does your policy protect you properly? Insurance claim departments are taking a hard nosed approach – make...
2. What is cyber insurance?   Twitter has experienced problems this week. Could it happen...
3. Insurance Myths – Part 4 To claim or not to claim   I’m often told...
4. Professional Indemnity Insurance – Discover how to avoid losses Professional advisers are not always protected by their insurance  ...