Indemnity insurance for resources professionals: best practice for choosing and buying a policy

We have been asked recently by a number of AusIMM members to review their professional indemnity (PI) policies in terms of the adequacy of cover.

A few of these policies were purchased directly off the internet and, like many things, the devil is in the detail. After doing a review of these policies, we discovered that for a number of members the exclusions imposed in the policy wording took away large amounts of cover and left the consultant significantly exposed to having no insurance cover in the event of a negligence claim.

Here are some examples of exclusions we found in online policies sold to geologists, mining engineers and mining industry consultants in general:

• A specific exclusion for any financial advice, and/or no cover for any investment advice or investment performance issues. Many AusIMM members are involved in reporting on areas that venture into financial matters. The online PI policies even exclude any claims for ‘alleged’ advice in relation to finance, accounting or tax matters.
  
  
• Does the policy cover all of your professional services? The onus is upon the member to fully declare their activities. Take for example, Geotechnical Engineering. We are aware that most insurers do not cover this profession. If it has not been declared on a proposal form to the insurer, there is a good chance they will deny any related claim in this area. Ask yourself: was any valuation / JORC / VALMIN work declared to the insurer? It’s dangerous to assume your cover is adequate by just ticking a box that says ‘Mining Consultant’. It is important that all of your professional services are fully declared to ensure adequate cover is in place.
  
  
• Related to the above: look out for a specific exclusion for any valuations. This was despite a particular AusIMM member being a responsible person for JORC valuations! This sort of exclusion would totally knock out any cover for JORC code or VALMIN type work.
  
  
• No cover of any corporate advisory work is a common exclusion. Our advice would be to avoid any sort of PI policy with such a broad exclusion. The term ‘corporate advisory work’ could mean many things and the worst time to discover exactly what the insurer thinks it means is when a claim needs to be paid.
  
  
• A total exclusion for ‘pollution’ was commonly excluded in most of these policies purchased online. Keep in mind that the legal definition of pollution is very broad – anything from noise, air, even sewerage is pollution. The pollution exclusions are often very broad excluding claims which involve any sort of losses arising from pollution and can regularly cut across mining industry work.
  
  
• Many of the online PI policies excluded any claims arising from any actual or alleged restrictive trade practices, restraint of trade or unfair competition. We have reviewed several contracts for AusIMM members which specify that they need this included in their insurance cover. Often large mining companies specify in their contracts the need for such cover, so the exclusion means the member would be in breach of their contract.
  
  
• The online PI policies have conditions which totally excluded advice or consulting in connection with mergers and acquisitions. Again, we have had members issue reports/do analysis which may impact upon decisions regarding mergers or acquisitions.
  
  
• No cover for advice which affects the price of, or market in, any shares or debentures of any company, commodity or currency. Again, an exclusion which is broad in its nature, meaning it can be hard to interpret its effect on cover.

Austbrokers is the endorsed insurance broker for AusIMM. This means we have established professional Indemnity and Public Liability insurance facility specifically tailored for AusIMM members as an exclusive member benefit. This facility does not have any of the above exclusions automatically in the policy wording and provides a far broader level of cover than many of these online PI policies. You can also find out more on the Austbrokers website here.

Insuring under the AusIMM facility ensures ongoing cover for all past work and has a specific extension to cover members for statutory fines and penalties. This is a real benefit for consultants operating in a heavily regulated mining industry where they can be personally named and required to attend official enquiries and be subject to statutory fines and penalties.

For mining consultants, it’s important that you have a good understanding of your business activities and how these impact your PI, so that you can ensure the cover you have is right for you.

About the author: Greg Hansen is a Director at Austbrokers Countrywide who is a General Insurance Broker that arranges insurance coverage for AusIMM members.  Greg regularly deals with members advising on amending contracts to ensure there are no gaps between contractual liabilities being agreed to and the cover being provided.