What is professional Indemnity Insurance?
Professional indemnity insurance covers any expenses and legal costs sustained in your defense and damages or costs that may have to be awarded if you are alleged to have provided substandard or unreliable advice, services, policies, or plans that cause your customer to lose money or suffer as a result. Professional indemnity insurance is also known as PI or professional liability insurance.
Example of a claim
A solicitor was briefed by their client to provide an agreement that would protect their intellectual property. The agreement would need to protect the client’s intellectual property when and if the client had the agreement signed and in place with a third party. The agreement proved useless when the third party stole the IP rendering the client’s business less profitable. The client lost a substantial amount of money and took legal action against the solicitor for professional negligence. The solicitor’s professional indemnity insurance policy fortunately covered their legal costs and compensation payments to the client.
What would a typical claim be?
- Substandard work.
Like everything in life sometimes things get missed or overlooked. In these situations, professional indemnity insurance becomes an invaluable asset that helps you navigate your way to a solution.
- Work is erroneous
This is not uncommon in many professions such as an accountant who can be accused of producing inaccurate work. Especially if the client subsequently suffered a financial loss or was inaccurately fined by revenue or another authority.
- Did not meet the brief
Sometimes a client might claim that you did not meet the agreed brief and they could try to sue you. Unfortunately, It only takes a grievance or misunderstanding to create a situation where this exact scenario could arise.
When might Professional Indemnity insurance be necessary?
Not all businesses need professional indemnity insurance but some do as part of their industries regulatory requirements or at the request of a third party, for example, as part of a government contract. Even if it is not an obligation, it does not mean that you would not be liable for thousands of euros worth of legal fees and compensation payments. Unfortunately, it does not stop there, you could also suffer a serious loss in income defending an allegation. We would advise a client to invest in a professional indemnity policy if :
- they provide advice or professional services to clients,
- they are a consultant or contractor, freelancer, self-employed,
- they provide designs to clients,
- If they need to protect themselves against allegations of mistakes or negligence in work they have undertaken,
- their industry association/regulatory body requires them to have it.
What professions typically need professional indemnity insurance?
Some examples of professions that typically need professional indemnity insurance are:
- IT programmers, developers, website agencies, contractors, engineers, CAD designers, and project engineers.
- Consultants in business, technology, recruitment, education, trainers, marketing, and sales.
- Agencies such as design, branding, web, digital development, social media, management, recruitment, and PR
- Designers such as web designers and interior designers
- Professional Services including architects, solicitors, accountants, medical professionals, personal trainers, and yoga instructors
Do I Need Professional Indemnity Insurance?
Let’s think about it here? If you gave advice to a client or the work you did for the client was incorrect and they suffered a financial or reputation loss as a result could they sue you? If the answer is yes then we would advise that you talk to a broker today to discuss the options available to you. Unfortunately, problems arise, it’s part of life and an apology may not be enough, especially if your client suffered a financial loss as a result. It is public knowledge that sometimes a relatively simple mistake or omission can result in a big compensation case that unfortunately bankrupts a perfectly viable and profitable business.
How To Buy The Right Coverage
The first thing to do is to do your research. Congratulations, you have begun this journey by reading this article. The next step is to talk to a broker about your business and your needs. Every business is different and has different needs so it’s important to find the right policy for you and your business. Finally, do your due diligence. Find out of the brokerage you are dealing with has experience in this area.
At Sheridan Insurances we have over 40 years of experience in dealing with businesses of all sizes and descriptions. We will happily guide you through the process of selecting the right cover for your business. We would be delighted to have a conversation with you if you have concerns about cyber insurance for your business.