When the provision of services or advice is your business, it is essential to safeguard your livelihood against claims of professional misconduct or malpractice. Professional indemnity insurance provides crucial financial protection for a broad range of professional advisers. Should a client suffer financial loss as a consequence of alleged neglect, omission or error, professional indemnity insurance will meet the cost of defending allegations and covering any payable damage. Usually, this type of insurance covers the liability of the policyholder for the acts, omissions or errors of directors or employees, partners or previous partners and agents.
The coverage essentially focuses on allegations surrounding failure to perform and monetary loss resulting from omission or error in the product or service sold by the policyholder. These grounds for legal action would not have coverage under a general liability insurance policy that covers more direct types of harm. This type of insurance may take on different names and forms based on the profession, particularly legal and medical. Additionally, coverage is sometimes a requirement under contract by some businesses that are the recipients of the service or advice.
Furthermore, there are times when coverage makes provision for the defense costs, which includes times when legal action ends up being groundless. Coverage under this type of insurance does not involve criminal prosecution nor wide-ranging possible liabilities under civil law which are not enumerated in the policy but could be subject to other kinds of insurance. Professional indemnity insurance is also required by law in certain areas for some types of professional practice.
Cases of Professional Indemnity Insurance Claims
Depending on the sector, the types of professional indemnity claims will vary. Below are some of the common claims by which most industries are affected:
Loss of Money or Supplies
Should your company be entrusted with money or supplies which is subsequently lost, you could be sued.
Professional Negligence
This happens when an error is made while doing work for a client. For example, accounting negligence if computing errors are made.
Losing Data or Documents
When data and documents are lost, there is a risk of trade secrets of the company falling into the hands of the competition; this could result in a claim being filed.
Defamation: Slander and Libel
This provides cover against a claim if someone feels you have said or written something false and defamatory about them.
Types of Businesses that May Require Professional Indemnity Insurance
https://www.smartbusinessinsurance.com.au/professional-indemnity-insurance have included a handy list of FAQ about this type of insurance:
What is Professional Indemnity Insurance – Professional Indemnity Insurance is generally designed for professionals who provide advice or service to their customers or clients. Professional Indemnity Insurance protects professionals, consultants, contractors and businesses against legal costs and claims for any personal loss or damage.
Why You May Need Professional Indemnity Insurance – No matter how skilled or careful you, as a professional consultant, contractor or business providing advice or a professional service, you are at risk of a dissatisfied client lodging a claim against you.
Who needs professional indemnity cover – Any professional person or business who provides advice or a professional service should strongly consider Professional Indemnity insurance.
There are some professions that are required to have professional indemnity by regulators in their respective industry. These include:
• Solicitors
• Financial advisers
• Chartered surveyors
• Architects
• Healthcare professionals
Even though this type of insurance is not legally required by every business, it is wise for other companies and sole traders that offer knowledge, skills or advice as part of their services to consider professional indemnity insurance. In addition, it is worth bearing in mind that, with this kind of coverage, you will be protected irrespective of whether or not a claim is justified.
Additionally, among the most exhilarating business developments of recent times is the increase of small businesses and independent consultants that provide highly-specialist knowledge, advice and skills to customers and clients. Providing these types of services is not without their risks. Errors are made from time to time and these can prove quite costly without the right insurance coverage.