Professional indemnity insurance is a policy that operates on the system of ‘claims made’ as opposed to occurring when an action takes place. ‘Run off’ is a PI insurance policy that protects a client from a claim that may be made far after their action took place.
This means that without ‘run off’ cover, insurers are not covering you from liability claims made not at the time of your personal involvement. To understand it fully, one must study an example. Take an IT specialist who works for a major firm and is fully covered by PI insurance. The same specialist then retires or moves on from the company therefore abolishing his PII from this time. This specialist could then have a claim made against them for their services that they may have provided during their time of work. Their original professional indemnity insurance in this case would not cover them from the claim. This brings about the importance of ‘run off’ cover when purchasing PI insurance, as it provides one with the coverage needed to protect them from this potential hazard.
It must be noted that this would only apply if the client had purchased ‘run off’ cover before or at the time of the incident, and not after.