Professional indemnity insurance for business

Here’s the scene:

You’re working with a client, but you make a mistake that negatively impacts them or their business. Your client proceeds to take legal action against you, which results in costly litigation fees.

Thankfully, you have professional indemnity insurance.

Let’s break down how this type of insurance can help to cover you in such unfortunate, but possible, scenarios.

What is professional indemnity insurance?

Professional indemnity insurance* protects professionals who provide advice or services to other businesses or individuals. This type of insurance is important to have because if the client claims your advice or services caused them damages, injury or loss, then you could be hit with hefty claim and associated legal costs.

Why do you need to consider professional indemnity insurance?

Despite your best intentions, the proverbial can hit the fan. That’s why many associations require or recommend that professionals are covered with industry-specific professional indemnity insurance.

What could go wrong? Well, examples of common breaches of duty and mistakes that can result in liabilities can include the following:

• A graphic designer creating content similar to a copyrighted design, resulting in legal proceedings
• An accountant auditing a client’s account incorrectly resulting in a penalty
• A personal trainer offering advice to a client, resulting in their client becoming injured
• An accidental omission in the provision of professional advice resulting in a critical deadline being missed

What does professional indemnity insurance cover?

Professional indemnity insurance policies cover your business against claims arising from (actual or alleged) mistakes and breaches in the provision of professional services and advice, including the compensation payable, legal fees claimed and defence and investigation costs.

Typically*, professional indemnity insurance can cover:

• breach of duty, including claims from breach of privacy concerns, like breaches of confidentiality and fiduciary duty. This also includes a professional duty that has been overlooked;
• damages due to the dishonest and negligent actions of employees
• breach of consumer, competition and fair-trading acts
• defamation cases arising out of the professional advice or service
• Public relations expenses to help protect your business’ reputation

What isn’t typically covered by professional indemnity insurance?

All professionals should understand their policies exclusions, so they understand what they don’t have covered.  Typically* policies will not cover claims arising from:

• Illegal acts
• Punitive and exemplary damages: when a judge has found a professional to be exceedingly negligent
• Intentional damage: typically, any acts, errors, or omissions from the insured professional that intended, or could reasonably foresee, third party loss, injury or damage
• Asbestos: any claim relating to asbestos isn’t covered by professional indemnity insurance
• Employee injuries: if your employee sustains an injury while working or carrying out your business’s activities, they would need to be covered under worker’s compensation insurance.
• Public Liability claims

What you’ll need to include in your policy quote

When you complete a quote, you’ll be required to enter the following details:

• Contact details
• Business details, e.g. the total number of employees
• Financial information, e.g. annual revenue
• Information about any previous claims

Your type of business and its services affect the level of professional indemnity insurance you may need for complete coverage. It is therefore vital to provide all the information you can about your business and its services.

Additionally, be sure to disclose any past complaints or claims made against you to your potential insurer. Even if you are doubtful, it’s still best to disclose any information you can to your insurer, as any intentional or unintentional omissions of past claims can invalidate or limit your cover.