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Who Needs Professional Indemnity Insurance
The need for Professional Indemnity Insurance is extremely high today. Whether you work in a company, or you are a contractor offering services within your specific professional industry, the client expectations of quality and service are set very high nowadays and you need to display a standard or even above-standard level of knowledge, care and skill.
Basically, a "professional" is anyone who provides specialist advice or services within their sphere of knowledge. This notion can be referred not only to accountants, lawyers and surveyors, but also to consultants, designers, advertising agents, real estate agents, tax agents, translators, private investigators, architects, workers of the IT industry, etc. Lately, the courts have taken a broader view concerning who can be called a professional. The list keeps expanding and also includes trade associations, riding masters, diving instructors, funeral directors, and a lot more.
With the increasing number of claims for alleged negligence or breach of duty, it is unwise to go without the Professional Indemnity Insurance cover. The cost of defending claims made against you may put your business and personal assets at risk. You need the right type and amount of coverage to protect yourself against losing your valuable assets.
The amount of cover your business may need depends on the type of services it provides, as well as the exposure it faces. When determining the amount of coverage you need to purchase, consider the value of your work for your clients and the potential financial impact your work might have on them should something go wrong. If the professional advice you or your employees give to your clients causes them financial losses, your Insurance will cover the cost of the claim. As a general rule, it makes sense to purchase as much cover as you can reasonably afford.
What exactly does a Professional Indemnity policy cover? Generally speaking, it protects from reputation-damaging claims made by dissatisfied clients.Your business could be exposed to negligence or breach of duty, libel and slander, unintentionally infringing on others' intellectual property, such as trademarks, copyrights, loss of documents or data belonging to your clients, dishonesty etc. Buying Professional Indemnity Insurance means protecting yourself against legal liability for an act, error or omission, professional neglect or any of the above-mentioned issues.
Let's use the example of the popular IT industry to get an insight into the way Professional Indemnity Insurance can be applied. Do IT professionals need to buy this policy and why? Many insurance companies have specialized insurance packages for IT professionals. These packages normally combine professional indemnity with public and products liability coverage.
There can be a number of cases when a conflict may arise between a client and the IT professional. The needs of a client may have been misinterpreted, there can be some errors in the software, or a particular hardware or software package may not provide the performance initially required. Legislation may also arise if some confidential commercial information of a client has been negligently released to third parties by the IT professionals, or if employees of IT companies have used their knowledge of clients' systems to interfere with their business. These are just a few of the cases when IT professionals will need adequate PI cover.
Professional Indemnity Insurance operates on a "claims made and notified" basis. It means that for a claim to be accepted by an insurance company, the policy needs to be in force at the time the claim is made and notified. With the Indemnity Insurance, it is necessary to be covered when a claim is made, which may be different from the time when the mistake is made.
Some professionals may stop buying Professional Indemnity cover once a contract is over, which means that they stay without any cover for past work completed. Even if you plan to cancel your coverage when you retire, for example, somebody could still make a claim against you and you will be unprepared for it.
Remember that your Professional Indemnity insurance policy can cover you for any claims arising out of work you completed in the past. Consider taking out retroactive cover to secure yourself against claims that may arise from previously completed work. Note that sometimes Professional Indemnity claims tend to arise even years after a contract for a particular service has been completed.
More and more often clients themselves will set a minimum limit of the indemnity they require before they start working with you. This limit can be set equally for all the service providers they deal with or it can depend on the specific nature of the services you provide.
Make sure the description of your profession is adequately and carefully covered in your Professional Indemnity policy. Note that in case you perform some activities at work which are not listed on your policy schedule, they are most likely to be excluded from cover.
The level of Professional Indemnity cover required varies with the particular activities undertaken by the professional. Much will depend on the circumstances of the particular situation. Make sure to ask your insurance broker about the main exclusions restricting the cover. Always read the fine print and make it a rule to double check the terms and conditions of your policy to be aware of what is covered and what is excluded.