When Australian engineers work with clients in overseas countries like those in the Asia-Pacific, the UK, or North America, their Professional Indemnity (PI) Insurance must account for the different regulatory environments and legal systems.
While the insurance policy is usually based in Australia, there are important considerations to ensure coverage extends to international work.
General Considerations for Overseas Work
- Jurisdictional Coverage: Most Australian-issued PI insurance policies specify the jurisdictions where the policy is valid. If you’re working internationally, ensure your policy includes coverage for claims made in the regions where your clients are based.
- Worldwide Territorial Coverage: Many PI insurance policies offer worldwide territorial coverage but may exclude or limit coverage in certain high-risk countries (such as the USA and Canada, due to their litigious environments). It’s crucial to confirm that your policy includes all regions where you will be working.
- Contractual Obligations & Choice of Law: Overseas clients may require specific insurance arrangements, including minimum coverage levels, local insurer requirements, and compliance with their country’s legal system. Contracts often stipulate disputes will be settled under local laws, so your insurance must extend to claims arising under those jurisdictions.
Locally Admitted Policies (LAPs): Why and When They’re Needed
In many countries, particularly across the Asia-Pacific, there is a regulatory requirement for insurance to be placed with a locally authorised insurer. This is referred to as a Locally Admitted Policy (LAP).
These policies act as the first line of response within their respective territories and are tailored to meet local compliance standards.
- Regulatory Compliance: Laws in some countries mandate that in-country exposures must be insured by locally licensed providers. An LAP ensures adherence to these regulations and avoids potential legal issues.
- Operational Ease: Having a local policy can streamline local trading operations, allowing claims to be handled by insurers familiar with the region’s culture and jurisdiction.
How LAPs Fit into Your Global Insurance Program
LAPs typically work in conjunction with a global policy, often sharing a “tie-in” limit. While they operate as stand-alone policies within their respective regions, they also form part of the broader global insurance framework.
This can be common with overseas subsidiaries where the subsidiary needs to obtain local cover in their country of operation. If the parent company holds a policy across the group, it is possible for the global policy to either;
- Provide an excess layer over and above the local policy, and/or
- Provide primary protection where the global policy would respond to claims that the local policy does not (where permitted and subject to relevant legislation)
These are complex policy arrangements and you must speak with your broker about your specific requirements.
Region-Specific Considerations
- Asia-Pacific: Many Asia-Pacific countries require LAPs for compliance. Ensure your Australian insurer understands the specific project risks and local regulations for the countries where you operate.
- UK: UK clients often expect robust Professional Indemnity coverage. Confirm your policy aligns with English law and meets higher coverage expectations, particularly for infrastructure projects.
- North America: The USA and Canada have complex insurance environments due to their litigious nature. Higher policy limits, compliance with local regulations, and endorsements for claims under US/Canadian law are essential.
Key Considerations for Working Overseas
- Policy Extensions and Endorsements:
- Ensure that your PI insurance policy includes a worldwide extension or has endorsements to cover specific countries or regions you’ll be working in.
- Check if your insurer has exclusions for certain countries (especially the USA and Canada) and discuss options for extending coverage or increasing policy limits if necessary.
- Level of Coverage:
- International clients, particularly in more developed markets (UK, USA, Canada), often require higher policy limits than what might be standard in Australia. For example, a $1-2 million limit may not be sufficient for large infrastructure projects overseas.
- Discuss with your insurance broker the type of work you’re doing, the value of projects, and potential risks to determine adequate coverage levels.
- Choice of Law and Jurisdiction:
- Review client contracts carefully for clauses related to jurisdiction and the choice of law in the event of a dispute. If the contract mandates that disputes will be resolved under the laws of the client’s country, ensure your policy covers claims made under that legal system.
- Some insurers may offer specific add-ons to cover claims made under foreign laws.
Next Steps
If you’re an Australian engineer working with clients overseas, especially in regions like the Asia-Pacific, the UK, or North America, it’s essential to ensure that your professional indemnity insurance provides adequate coverage for international work.
Confirm that your policy includes worldwide coverage or is extended to the specific countries you’re working in. Take note of the jurisdiction, policy limits, and legal environments that may affect your risk exposure.
Before you sign anything, talk to your broker to ensure that you have the correct insurance coverage in place.
The information on this blog and website is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision. We recommend you consult a licensed insurance broker in order to assist you.
