Professional Indemnity (PI) policies protect businesses that provide advice or services to third parties. In today's commercial society, others are eager to gain an advantage, and litigation is increasing. Any claim made against you, whether legitimate or baseless, requires significant funds to investigate, defend, and resolve. Damaged reputation can also cause huge losses to your balance sheet.
PI or professional liability policies will indemnify the insured for losses arising from legal liability due to alleged breach of professional duty in providing professional services, as well as related legal costs for defending such claims.
Any professional can be sued for alleged or actual errors, even if no mistake was made; merely defending against these lawsuits can be very expensive. Professional indemnity insurance protects businesses, sole traders, or freelancers that provide advice or services to third parties (including the public and other businesses). Due to the professional services you provide, you owe a duty of care to those who may rely on the information you provide. This means an important part of your insurance will be PI insurance. PI policies can provide indemnity for what you may need to pay to correct errors you have made, or cover any legal costs resulting from negligence, such as providing incorrect advice.
Traditionally, coverage is closely associated with high-risk professions such as lawyers, doctors, engineers, accountants, and financial advisors. Today, the term "professional" is applied broadly, so many different professions should purchase professional indemnity insurance. Companies providing professional services to others may make mistakes, overlook key information, misstate facts, or be misunderstood. They may be sued by clients for allegations such as errors, omissions, or negligence in providing services; failure to provide services, fraud, improper documentation, misconduct, confidentiality breaches, violation of state and federal laws.
When providing a quote, the insurance company considers many factors when determining the type of coverage and the terms and conditions that will be imposed. Considerations include (but are not limited to): scope of professional services provided; annual fee income or projected income; split of activities across different jurisdictions; claims history; coverage, including liability limits and deductibles.
What is Not Covered by Professional Indemnity Policies?
Policies may vary by insurance company, but professional indemnity policies typically do not cover the following: bankruptcy, terrorism, intentional damage or misconduct, pollution, general liability (including property damage or bodily injury), pending or prior situations and/or claims.
Why Risk Litigation That Could Financially Weaken Your Company?
Now, we live in a world with increasing demands; mistakes in the services we provide are not easily forgiven. In the context of regulatory and contractual frameworks within which we all work becoming increasingly tight, the risks are obvious. Without the correct PI insurance, no professional is safe; they are not protected from civil liability, nor from financial and reputational loss.
