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Professional Indemnity

Professional Indemnity Insurance

Professional Indemnity Insurance (PI Insurance) is essentially an insurance product designed for professional firms and people which covers them in the event of certain errors made during the course of their business activities.
In an increasingly litigious environment, you’ll need professional indemnity insurance to protect your business against claims made by a third party as a result of an error, omission or negligent advice.
In a changing economic climate which features rapid technological advancement and increased regulatory pressures, more and more businesses are finding themselves at risk of lawsuits due to perceived, or actual, negligence or errors.
They may also need to satisfy regulatory and client-imposed contractual requirements. Whilst this insurance is not legally compulsory, it allows companies and their professional people to work without fear that they will be sued by a client or a third party for problems that occur as a result of their professional activities.
It allows professionals to carry out their work with greater confidence and piece of mind. Nowadays, the increasing reliance of businesses on the contracted services provided by many occupations has vastly increased the scope of the term ‘professional’, and a professional is regarded as any person or firm offering specialist advice or services. 
The risks are as significant as ever and mistakes can still lose a professional their business and their reputation without adequate professional indemnity insurance.
The cost of a claim against you or your business could run into many thousands of pounds – it could literally “take your business under” – and that’s not accounting for the time and effort required to fight any such allegations.
A robust PI policy will cover all costs of the claim (legal fees etc) and also allow you to detach yourself somewhat from the claim itself and allow your insurer to assist.
Some examples of businesses that should strongly consider PI Insurance are:
  • Accountants
  • Architects
  • Engineering
  • Financial Services & Advisors
  • Fire Risk Engineers
  • Healthcare and First Aid Training
  • IT Companies
  • Manufacturing
  • Marketing and Media companies
  • Surveyors
  • Solicitors
  • Web Developers and Graphic Designers
Whilst many Professional Indemnity policies provide cover for commercial companies (and all their employees), these policies are also suitable for freelancers, contractors, consultants and those that are self-employed.

Frequently Asked Questions

Professional indemnity insurance protects you against mishaps that may result from your professional advice. It ensures that you are not bankrupted by legal action based on what at the time of the event and given the information that was available to you was genuine guidance aimed at benefiting your client.

Professional Indemnity insurance covers any legal costs that may come out of a client taking legal action against you, as well as any compensation that also falls to you if you end up losing the lawsuit. This could be loss of sales revenue for example, is a successful claim against you is proven that your client lost revenue as a result of your incorrect advice. The cover is based on your professional skills, so for example, accounting PI insurance protects against financial loss and related lawsuits, engineering PI insurance protects against problems arising from incorrect advice that may result in additional project costs and re-engineering and marketing PI insurance protects against making a spurious declaration on a product or service that results in a lawsuit.

A ‘claims made’ policy provides cover for claims which are made and notified to the insurer during the period of insurance. This means that provided the wrongful act occurs during the period of insurance, and you report it to the insurer during the period of insurance, it will be covered. However, if the policy is cancelled or not renewed, cover will end and any subsequent claim – regardless of when the wrongful act occurred – would not be covered by that policy. It is important to note that your professional insurance cover needs to be active and in place at all times, as this will protect you from a mistake made some years previously that has only recently mean discovered. As such, it’s important to have professional indemnity insurance cover in place – even between contracts or work – to ensure your business is protected.