Understanding the importance of ‘run-off’ cover

It is very important to realise that professional indemnity insurance, as provided for our members through Aon/NZI, covers claims that are first lodged during the period for which the policy is active. 

This is different from the date on which the alleged problem took place. Most complaints are made some time after the event took place, and occasionally - as exemplified by the complaint made to the HDC Dr Andrew Dunn refers to in this newsletter - some years later. 

The message is that the insurance policy we hold today protects us for all professional behaviour and decisions made by us, up to and including today. The day you allow the policy to lapse is the day that you lose any cover for all previous professional activity. This principle is the same for all insurance companies - they cover claims made during the period of the current insurance contract/policy.

As medical professionals, we must keep this in mind in circumstances such as:

• Taking a break in our professional career for whatever reason

• Practicing in another country, either short term or long term 

• Ceasing clinical practice, either short or long term

• Retiring from professional practice

In each of these circumstances, our need for professional indemnity cover may seem diminished, but it has not been extinguished. Ongoing cover – often referred to as “run-off” cover – is still required. Such cover is not automatic, just as the year-on-year renewal is not automatic. It must be applied for each year. A grace period should not be relied upon, if renewal is not made.

NZI offers “run-off” cover to Medicus members upon application at the time of annual policy renewal. This may be complimentary, or come at a cost, depending on (a) the number of years cover has been provided and (b) the claims history during that period or any previous period (with an alternative provider). Typically, cover is available for a period of up to six years, but still requires annual renewal.

Key Takeaways:

• Current indemnity cover provides for claims made during current and prior periods.

• When your cover/membership lapses, so too does cover for all prior periods.

• “Run-off” cover is essential for the period after you cease clinical practice in New Zealand. 

Richard Stubbs MD FRCS FRACS

Chairman