Professional Indemnity Insurance

Defence against negligence

If you are in the business of giving professional advice to other people as part of your job, there will be a certain weight and importance attached to those opinions. If you have placed yourself in a position of authority and make a living out of providing knowledge or skills, you may want to take out a professional indemnity insurance policy.

What is professional indemnity insurance?

Professional indemnity insurance is designed to provide cover for the person who holds the insurance if a claim of professional negligence should be brought against them.

Professional indemnity insurance will protect you from claims made against you or your company by a third party if you make a mistake or are discovered to have performed your duties in a negligent way. The insurance is incredibly useful for covering legal costs, as in cases of professional negligence these can become quite high.

Who needs professional indemnity insurance?

There are certain types of businesses that Professional Indemnity insurance would obviously suit, but some industries are legally required to take out this kind of insurance as a regulatory requirement or as part of the process of becoming a professional.  This list of industries where practitioners are legally required to have Professional Indemnity Insurance includes, but is not limited to:

• accountants
• solicitors
• architects
• financial advisors, mortgage providers and insurance brokers c
• consultants
• advertising, marketing and PR companies
• designers
• those working with information technology
• medical advisors.

What links all of these groups of professionals is that clients, customers and consumers are likely to have a lot of faith in their advice due t their professional status. This faith is based on the assumption that the professional has received training and has practiced and performed their role numerous times. This can make it all the more damaging when one of these professionals acts in a negligent way.

Types of professional indemnity insurance

There are three main types of professional indemnity insurance:

Negligent act, negligent error or negligent omission protects the insurance holder against any loss or damage that occurs as the result their negligent act, negligent error or negligent omission when they were carrying out their service. This is the narrowest form Professional Indemnity Insurance.

Negligent act, error or omission provides the insurance holder with more cover then the first type of Professional Indemnity Insurance but is still only concerned with losses, damages or circumstances that occur as a direct result of the professional’s service.

Civil liability has a much wider cover then the two policies explained above. This provides indemnity form any civil liability, including defamation, personal injury and breach of contract. You will need to check your policy as there are usually certain types of liability that are excluded.

One important thing to remember is that professional indemnity insurance usually works on a claims basis, and will only cover claims if the policy is ‘live’. It is therefore very important to make sure you keep all documentation and are aware when you will need to renew your policy or if you need to change it should your circumstance change. It is easier then you think to get caught out through inattention.

Get advice on professional indemnity insurance from a qualified independent financial advisor