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Professional Indemnity Insurance

Business-owners or professionals can be left vulnerable and in a treacherous financial position if allegations are made against them pertaining to neglectful professional practice. If legal action is taken, compensation costs could be debilitating and one's reputation could be left in tatters, making it challenging to acquire future employment.

Professional Indemnity insurance (PI) is a form of risk-management that protects one's professional and financial situation and reputation should such a scenario arise. Indemnity means compensation, and so a Indemnity policy will cover the beneficiary for repayment costs and legal fees, or at least for a portion of it depending on the agreed extent of the cover.

Indemnity Insurance Coverage

PI policy coverage ranges from one provider to another, though they generally cover for a range of professional malpractices. These include but are not limited to negligence; confidentiality violation; breach of copyright; loss of data, documents or moneys for which they are responsible and misconduct in a professional capacity.

PI insurance operates slightly differently from other more commonplace insurances like home, travel and car insurance, in that it operates under a 'claims made' rather than the more familiar 'claims occurred' system. This means that when a claim is made, the insurer who is operating at the time of the incident will not necessarily represent the case, instead the insurer covering at the time the claim is made will take on the suit.

Indemnity Insurance Obligatory

Professions that provide advice or a service to paying clients are those for which a PI policy is advisable, and in some cases legally compulsory. For example, solicitors operating in the UK are legally obliged to have a PI policy covering individual cases for at least £2-3 million.

Due to the nature of solicitors and lawyers' work practice – providing extensive and often litigious advice to high-paying clientèle – there is an increased need to protect oneself from dissatisfied customers who have incurred financial loses as a result of following advice given by a qualified lawyer.

Indemnity Insurance Voluntarily

Other professions that are advised, though not legally obligated (in the UK), to take out PI policies include dance instructors and fitness trainers, architects and designers, homeopaths, masseurs, physiotherapists and osteopaths (among other alternative health practitioners) as well as engineer and accountants, to name a few.

It is important to be aware of the fact that legal action can be taken against a business or professional up to 6 years after an incident of contention has arisen and whereby a professional has provided blameworthy advice or unsatisfactory services. This means that a claim could be made against somebody who is ceasing to practice, who has changed careers or employees or after a business has reached cessation.

The way to combat this issue is by ensuring that the insurance policy you chose has what is know as run-off cover. Run-off cover is a safety buffer to ensure that a business-owner or professional remains financially safe and protected if a case is brought against them after their primary PI policy has ended.