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Professional Indemnity
What is Professional Indemnity Insurance?
Professional Indemnity Insurance provides protection for businesses and professionals against claims of negligence, errors or omissions made by clients due to services or advice provided. It covers legal costs, as well as any compensation due if you are found liable.
What are the coverage areas?
This type of insurance is particularly important for businesses that provide professional services, consultancy, or advice, such as architects, solicitors, consultants, accountants and IT professionals.
- Covers claims where a client alleges that your professional advice or service caused them financial loss due to mistakes or oversight.
- For example, an architect could be sued if a design flaw results in costly construction changes.
- Protects against claims arising from failure to fulfil a duty of care, such as missing a deadline or failing to meet agreed performance standards, which results in client losses.
- Covers mistakes or failures to include crucial details in professional work that lead to a financial loss for the client. This is particularly common in contracts, design work, or consultancy services.
- Provides protection if your business is accused of making libellous or defamatory statements, either verbally or in writing, that harm a client’s reputation.
- Covers claims for unintentional breaches of client confidentiality, where sensitive or proprietary information is shared or exposed, resulting in financial or reputational harm to the client.
- Protects against claims that arise if a client alleges that your work or advice infringes on their intellectual property rights, such as patents, trademarks or copyright.
- Covers costs related to the loss, damage, or destruction of important client documents or data under your care, including the cost of restoring or replacing them.
- Includes the costs of legal representation and defence if a claim is made against you, even if the claim is unfounded or spurious. These costs can be substantial, particularly for complex or high-value claims.
Insurance With A Purpose
Key features:
Tailored Cover for Specific Professions: PI insurance is often customised to meet the specific needs of different professions. For example, the risks faced by an IT consultant will differ from those of a solicitor or an accountant, and policies can be tailored accordingly.
Retroactive Cover: Many policies offer retroactive cover, which means claims made for work done before the policy started can be covered, provided the insurance was in place at the time the claim was made.
Run-Off Cover: If you cease trading or retire, PI insurance can still cover you for claims made after you stop practising, as long as the work in question was performed during the active policy period. This is particularly important for professionals like architects or consultants whose work may lead to claims years after completion.
Worldwide Coverage: For businesses offering services internationally, PI insurance can include cover for claims made outside the UK. Be sure to check whether your policy covers claims in specific regions, especially if working in countries with different legal systems.
Benefits:
Financial Protection: PI insurance ensures that your business is financially protected from the potentially crippling costs of legal action, including compensation payouts, which could otherwise lead to bankruptcy or closure.
Client Confidence: Many clients, particularly in sectors like legal services, architecture, or consultancy, require businesses to have PI insurance before entering into contracts. Holding PI cover can enhance your credibility and make your services more attractive to potential clients.
Peace of Mind: Knowing that your business is covered for potential claims allows you to focus on providing the best possible service without the fear of financial ruin if something goes wrong.
Legal Expertise: If a claim is made against you, your insurer provides access to expert legal teams who specialise in professional liability cases. This ensures you receive the best possible advice and representation.
Key Considerations:
Policy Limits: PI policies come with a maximum limit on the amount that can be claimed. It’s important to ensure that the limit is high enough to cover potential claims, especially for businesses dealing with high-value projects or clients.
Exclusions: PI insurance may exclude certain types of claims, such as those involving fraud, intentional wrongdoing, or criminal activity. It’s important to understand the exclusions in your policy to avoid unexpected gaps in cover.
Industry Regulations: Some professions, such as solicitors, accountants, and architects, are legally required to hold a minimum level of PI insurance as part of their regulatory obligations. Be sure to check the requirements for your industry.
Claims Made Basis: PI insurance typically operates on a “claims made” basis, meaning it covers claims made during the policy period, regardless of when the work was actually done. If a policy lapses or is cancelled, you may no longer be covered for future claims unless you have run-off cover.
Cost vs. Risk: The cost of PI insurance is often determined by the level of risk associated with your profession. High-risk industries, such as financial advisory or medical consultancy, may face higher premiums due to the potential for larger claims.
Choosing a Professional Indemnity Insurance Provider:
Experience in Your Industry: Choose an insurer with a strong track record in your industry. Providers with expertise in specific sectors can offer more tailored cover and better understand the risks you face.
Reputation for Claims Handling: It’s important to select an insurer with a reputation for fair and efficient claims handling. Look for providers with positive reviews from similar businesses or professionals in your field.
Customisable Policies: Ensure the policy can be customised to fit your unique business needs, with options to adjust cover limits, include retroactive cover, and extend worldwide coverage if required.
Competitive Premiums: While price is important, be sure to balance affordable premiums with comprehensive coverage. Cheaper policies may come with lower limits or exclusions that could leave you exposed in the event of a major claim.
Speak to our Professional Indemnity
Expert Advisor
We understand the importance of having easy and accessible ways to get in touch with us. That’s why we’re excited to offer you a way to connect directly with our Senior Team quickly and conveniently.
Nicola Wyatt
Senior Insurance Practitioner
