Professional Indemnity Insurance

Professional Indemnity Insurance   –   Get A Quote
Professional Indemnity Insurance (PI) is more commonly known as errors & omissions (E&O) in the US. This cover is a form of liability insurance that helps protect professional advisers – and service providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and any damages which may be awarded.

What is Professional Indemnity Cover?
PI cover focuses on suffered loss as a result of non-performance, breach of contract and/or professional negligence in the alleged failure to perform on the part of the provider. These are potential causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability coverage can also provide for the defense costs, including when legal action turns out to be groundless. Coverage does not include criminal prosecution, nor a wide range of potential liabilities under civil law that are not enumerated in the policy, but which may be subject to other forms of insurance (D&O). Professional Indemnity insurance is required by law in some areas for certain kinds of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
Professional indemnity insurance may take on different forms and names depending on the profession and juristiction. For example, in reference to medical professions it is called malpractice insurance, while Professional Indemnity Insurance is used by consultants, brokers and lawyers.

Other professions that commonly purchase professional liability insurance include accounting and financial services, construction and maintenance (general contractors, plumbers, etc., many of whom are also surety bonded), and transport. Some charities and other nonprofits/NGOs are also professional-liability insured.
What is Covered
Professional Indemnity insurance provides limited cover against the consequences of claims for professional negligence. PI cover is for the benefit of the professional and not the client. Clients cannot generally claim directly against the Professional Indemnity insurance carried by professionals Unless contractual limitations have been agreed between the professional and his client, the professional’s liability is: o unlimited in amount, and o extends over a considerable period of time. Professional Indemnity insurance must be tailored to the needs of the professional because the cover: • will have a set limit on the amount that insurers will pay – the limit of indemnity. • operates for a set period of time – the period of insurance. • is subject to the policy terms, conditions, limitations and exclusions. • operates on a ‘claims made’ basis.

Who Needs Profession Indemnity Insurance?
 If your business sells knowledge or skill, such as providing advice, design, specifications, supervision etc., you have a responsibility and duty of care to your client, and third parties, through the services and expertise you provide. Many professions are required to have Professional Indemnity insurance cover as a regulatory requirement or as part of their professional authorisation. This includes solicitors, accountants, architects, surveyors, mortgage intermediaries, insurance brokers, and financial advisers. Many consultants including consulting engineers; advertising and PR agencies; and designers also choose to have this type of insurance to meet client requirements and to benefit from financial protection in the event of a claim arising. The duty of care owed is generally the exercise of ‘reasonable skill and care’, in the discharge of the services provided. If a professional fails to exercise this duty (i.e. is negligent) they may be liable for losses incurred by their client, and/or third parties. Taking into account the operation of the current legal system, even defending claims can be very costly. PI cover is for the benefit of the professional and not the client, although, far too often, it is not viewed that way. Clients cannot generally claim directly against the Professional Indemnity insurance carried by professionals – they must prove liability first, a legal process which can be time-consuming, expensive and uncertain.

How Does Liability Attach?
Personal liability attaches where a practice operates as either a sole proprietor or a partnership. In the case of a partnership, liability is joint and several. Even when a practice ceases to operate, these personal liabilities do not come to an end, but continue for the limitation periods in contract and tort. Corporate bodies assume liability in their own right although individuals within such organisations can attract personal liabilities in certain instances.

How Does The Cover Work?
If an allegation of professional negligence is upheld, the professional is likely to be liable for the losses incurred by the plaintiff which arise as a reasonably foreseeable consequence of their actions. The professional will often be responsible for the plaintiff’s legal costs and these can be substantial. Large sums of money are often spent simply trying to recover fairly minor losses. Direct financial losses (economic and consequential loss) as opposed to the cost of rectifying a defect are implicit under contract unless specifically excluded. There is more of a grey area arising out of the question of liability for economic and consequential loss at common law although recent judgements have allowed such losses to be recovered.
What Can Be Claimed?
If an allegation of professional negligence is upheld, the professional is likely to be liable for the losses incurred by the plaintiff which arise as a reasonably foreseeable consequence of their actions. The professional will often be responsible for the plaintiff’s legal costs and these can be substantial. Large sums of money are often spent simply trying to recover fairly minor losses. Direct financial losses (economic and consequential loss) as opposed to the cost of rectifying a defect are implicit under contract unless specifically excluded. There is more of a grey area arising out of the question of liability for economic and consequential loss at common law although recent judgements have allowed such losses to be recovered.

How Much Does It Cost?
The cost of cover will depend on the business activity, turnover and many other factors, however it must be considered that the cost of defending against a claim may be sufficient to put many businesses to the wall. Professional Indemnity Insurance is a necessary and justifiable business expense and should be seen as a minimum requirement.