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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional liability

Calder & Finch, a mid-tier firm, has a PII policy with a significant excess and an aggregate annual limit. In one year, three separate claims arise from different audits, and the firm's total insured loss would exceed the aggregate limit. Which conclusion is correct?

The firm remains exposed to uninsured loss. It must bear the excess on each claim, and once the insurer's aggregate annual limit is reached, any further loss falls on the firm and potentially its partners. Separate claims do not oblige the insurer to pay beyond the policy limit.

  1. AThe firm bears the excess on each claim and any loss above the aggregate limit, so it remains exposed to uninsured lossCorrect
  2. BThe insurer must pay all three claims in full because the claims are separate
  3. CThe excess applies only once to the total of the three claims, and the aggregate limit does not matter
  4. DThe firm's partners are protected from personal liability above the limit because of the insurance

Explanation

Typically the firm pays the excess on each claim, and the insurer's payments stop at the aggregate limit. Amounts above that fall on the firm. Insurance does not shield partners from personal exposure where the firm's structure leaves them liable, so uninsured loss can remain.

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