The professional service dilemma:
Most businesses invest time and effort into looking after their customers and building up a good professional reputation. Unfortunately, mistakes can happen resulting in disputes which can often lead to hours of worry, expenses, bad publicity and even significant damage to your professional reputation. For example, a construction company may have to face complaints on the quality of materials used, non-adherence to timelines and lack of or changes in amenities provided. Any variation between original assurance and the actual implementation might land the company in legal trouble, even when the situation was not entirely their fault.
Protecting the service provider:
Professional indemnity insurance is designed to protect businesses and individuals who provide advice to third parties in their professional capacity.
Professional Indemnity Insurance is sometimes referred to as professional liability insurance or errors and omissions insurance (E&O). The PI cover is designed to protect the service provider if a customer finds fault with the adequacy or quality of service rendered in their professional capacity. With professional indemnity insurance on hand, the cost of legal defenseand the compensation they may need to pay to the client following a claim made is covered.
What does a Professional Indemnity Insurance typically cover?
Your legal defense
If a client brings up a claim against you, you need to defend yourself legally, even if the claim is not justified. PI will help you tide over the legal expenses associated with the case.
If the client wins the case, you may have to reimburse the money they have lost due or cost they have incurred resulting from your advice. They may also be awarded a compensation amount. All these expenses are covered by PI Policy.
Run off insurance
Claims against professional liability never end, even after the firm has ceased to operate. Run off insurance ensures that these claims are covered so that you are not held liable.
Do you need to have Professional Indemnity Cover?
Some professions are required to have professional liability by regulators in their industry. This includes:
Though it is not a legal requirement, professional indemnity insurance is a worthy option for a company or sole trader rendering professional advice, knowledge or skills. It’s worth remembering that, with this type of cover, you remain protected regardless of whether a claim is justified or not.
Furthermore, recent years has seen the rise of independent consultants and small businesses, who offer specialist knowledge, skills and advices to clients and customers.Offering this kind of service is risky. Mistakes can happen anytime, anywhere and without the right cover, those small errors could prove costly.
Examples of professional indemnity claims
Depending upon the sector, the types of professional indemnity claim you would encounter could vary dramatically. For instance, even a spelling mistake on a printed advert could land the responsible marketing agency in trouble.
That said, there are some common claims which affect most industries:
This occurs when you make an error in judgment while doing a piece of work for a client. For instance, if an engineer designed a heating system for a large hall or reception without considering its size properly, and if the installed radiators did not heat the area sufficiently and the system had to be removed and/or redesigned, your client can claim under professional negligence.
Loss of money or goods
Should your client entrust you with money or goods and you failed to keep it safe, they could sue you. A typical scenario would involve a shoe mender being entrusted with a customer’s shoe: he is legally liable for the safe storage and return of the shoe.
Losing documents or data
Companies that want to prevent their trade secrets from falling into their competitors’ hands can insure against lost of documents or data. When business documents and data are lost, orif an IT contractor loses confidential information, a claim could be made.
Defamation: libel and slander
Libel and slander insurance covers you against a law suit when someone feels that you have written or said something defamatory about them. Slander is the term for anything that is spoken and libel is for anything that is written.
Breach of copyright or confidentiality<
Use of another person’s intellectual property can be an expensive mistake, whether it is used intentionally or accidentally. If a graphic designer uses a font without the rightful permission, they are breaking the copyright law and could be sued.
How much professional indemnity insurance is required?
Professional indemnity insurance is often sold in varying limits. To decide how much professional indemnity insurance you need, you should consider:
- The size of the business
- The client base you are dealing with
- How much it might cost to defend yourself in court?
- Is your industry regulated?
The amount of cover required is dependentupon the amount of exposure your client has.
If you’re in an industry which requires you to have professional liability, it’s quite likely that there is a specified amount of cover associated with your profession.
Want to know more?
At Insurance Advisor, our decade long experience has equipped us with a deep understanding of our clients and their professions.We offer solutions tailor-made to match your profession and problems specific toyour industry.Our professional Indemnity and Liability Insurance schemes help you sail through the legal hassles and compensation issues arising out of any accidental or professional negligence on your part. The insurance covers payment of damages, settlements, legal defenses, frauds committed by an errant employee and many more.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row]