What is Professional Indemnity (PI) and who needs it?
Whether you’re an accountant, an architect, or an allied health professional, you have a duty of care to clients. You must serve them with a reasonable degree of skill, competence and ability. Most often that is exactly what happens – but no-one is infallible and whether through error, omission or breach of professional duty, problems can arise, leading to clients seeking compensation.
That’s where Professional Indemnity insurance comes in. For some professions, PI coverage is compulsory – a condition of licensing or registration. Even where it is not a pre-requisite to practice, PI cover just makes sense and savvy professionals regularly review their PI policy to ensure they are fully protected – now and in the future.
Professional Indemnity insurance (PI), is a form of liability insurance which helps protect professional advice & service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm.
Public Liability insurance covers legal liability for claims arising out of personal injury or property damage as a result of an occurrence in connection to your business activities. It requires actual or alleged causation by your business.
Products liability is a relatively standard extension to Public liability insurance that broadens the cover to include personal injury or property damage arising out of your products, including tangible goods that are manufactured, sold or maintained by your business. The policy is triggered by the nature of the claim defined in the insuring clauses namely personal injury or property damage.
Public and Products Liability insurances do not normally cover pure financial loss claims where no property damage or personal injury has occurred.
Professional Indemnity generally covers legal liability for claims arising out of an actual or alleged breach of your professional duty. Unlike public liability insurance, the claim types are not normally defined in the insuring clauses of the policy and therefore can include personal injury, property damage or financial loss. A professional duty of care generally includes the provision of professional services including design, advice or formula.
There can be a potential overlap between Public/Products and Professional Indemnity insurances and this is addressed in most policies by way of policy exclusions. However, with any liability insurance, this demarcation is not always clear. Public/Products liability policies usually have some form of professional services exclusion, similarly, professional indemnity policies often contain exclusions relating to personal injury or property damage claims, unless arising out of a breach of professional duty.
The danger is that some exclusions insurers impose in order to write back cover to the core policy intention sometimes have a greater than intended impact and end up actually excluding cover for critical parts of the business, leaving the Insured with an uninsured gap rather than an overlap between policy coverage.
For professionals in the construction industry or involved with the manufacture, sale, supply or maintenance of goods such as design and construct builders, IT firms or combined engineering consulting and contracting firms this area is a potential minefield highlighting the importance of arranging your liability insurance package through a specialist broker.
Professional liability insurance may take on different forms and names depending on the profession, especially medical and legal, and is sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
The moment you start offering professional advice – whether virtually or in the real world – your risk profile increases.
Because PI policies are written on a “claims made” or “claims made and notified” basis, coverage is essential even when you take parental leave, a sabbatical, or retire – the statute of limitations on a PI claim is seven years. PI protection is an important investment in your continued peace of mind.
Interested to know more about PI insurance? Logan Insurance offers online applications
or call us today on 1300 787 789.