Professional Indemnity Insurance

It is easy to see that if you make a tangible physical product and that if that product when supplied caused some injury, loss or damage to other people property, due to a fault, you would be responsible and you would look to your Product Liability Insurance to deal with any claims.

But when your product is not physical, like a design or business advice, and the injury loss or damage is just a financial loss or a requirement to pay out money, then how to make a claim is not that simple to see.

Products Liability Insurance won’t deal with financial loss claims and sometimes even losses from the design and specification of prototypes will not be covered.
Specialist insurance covers are required to cover event like these and so if you are in the business of selling your knowledge or skills, you may want to consider taking out Professional Indemnity [PI] insurance.

Professional Indemnity insurance protects your business against claims for loss or damage made by a client or third party if you make mistakes or are found to have been negligent in some or all of the services you provided and the advice you have given. Professional Indemnity insurance will also cover legal costs, usually in addition to your chosen limit of cover.

Many professions are required, like us, to have Professional Indemnity insurance cover as a regulatory requirement or as part of their professional authorisation. This includes solicitors, accountants, architects, mortgage intermediaries, insurance brokers and financial advisers.

Many ‘blue chip’ organisations also require all of their sub-contractors or project managers to carry a minimum level of Professional Indemnity insurance and Consultants, Advertising and PR agencies, and Designers also choose to have this type of insurance as well as people like Funeral Directors and those in Construction who also provide a design function.

One important aspect to bear in mind when considering Professional Indemnity insurance is that cover is usually on a claims-made basis. This means that the policy will only cover claims that are made while the policy is 'live'. So, if you plan to cancel your policy when you close your business or retire, you may need to arrange 'run-off' cover for a period of time afterwards.

In addition if you plan to change insurers, you will either need to arrange run-off cover or get agreement from your new insurer to accept new claims for previous incidents.

One way to minimise such claims is to make sure projects are well documented. Ensure that you set out specific responsibilities in your contracts with clients beforehand and deal with complaints promptly. Get your clients to ‘sign off’ on work you have done ageing that it is correct throughout your project.

As this is a specialist area of insurance you should take advice from a suitably experienced insurance broker. This class of business is dealt with here by Clive Turner. Please give him a call on 01772 783286 if you would like a chat.


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