What is professional indemnity insurance

Professional Negligence – Indemnity Insurance

If a person regularly gives professional advice or provides a professional service as a way to make a living, they should seriously consider taking out a professional indemnity insurance policy. If the advice given turns out to have damaging consequences for the customer or the service is not up to the standard expected, the professional could be accused of professional negligence.

If a professional is accused of acting in a negligent way when performing their duties and they have legal action taken against them, professional indemnity insurance will cover the legal costs involved in defending themselves against such a claim. If a professional is employed by a company, indemnity insurance will also act to provide the company with cover. Cases of professional negligence can involve large sums of money and the legal fees and costs can balloon very quickly, so having the kind of protection that indemnity insurance can provide could prove very useful.

Professional indemnity insurance will be very suited towards certain types of professions. These are the professions in which customers and clients are likely to expect a certain level of service or expertise due to the professional’s status. It is not unreasonable to assume that someone who is claiming to be a professional will have undergone an advanced level of training and will have a level of expertise that is well above the average person. Professional indemnity insurance is there to help when a professional does not perform to the expected level and is subsequently accused of professional negligence.

There are certain types of professions where it is a requirement of the industry regulators that individuals take out indemnity insurance policies before they are legally allowed to practice. These professions include:

• Solicitors
• Consultants
• Designers
• Medical advisors and other health care providers
• Those involved in marketing and advertising
• Those involved in information technology
• Financial advisors

The basic idea behind indemnity insurance is that it fills a hole that was left by the coverage of other forms of insurance. Liability insurance will only tend to provide cover when there is a case involving actual bodily harm, personal injury, damaged property or false advertising. Other types of insurance also fail to provide cover in the case of professional negligence claims that may just involve financial damage to the customer.  Professional indemnity insurance goes some way towards plugging that gap, although it will not provide cover of there are criminal charges involved in the legal action.

When a professional is looking to acquire a professional indemnity insurance policy, they need to make sure that it provides the cover they need. Some policies will not cover any negligence that does not fall into the category of omissions or mistakes, while other policies are broad enough to include other civil liabilities such as defamation and breach of contract. Most policies will also be claims based, which means that they only cover a professional for a limited period of time.

Professional indemnity insurance is an extremely useful investment for anyone that relies on being a professional with a specific skill set as a way to make a living.