Professional indemnity insurance
Who it’s for
Professional indemnity insurance is a form of liability insurance. Unlike Employers Liability insurance, it is not a cover that is legally required, under UK law. To explain in more detail, most people are aware of public liability insurance, this covers you or your business against any physical injury, illness, disease or damage that you cause to a third party. When we say third party, this includes people or property.
Public liability relates to a physical loss being suffered or an injury being inflicted. For example, if you hit someones car, a cleaner spills bleach on a carpet or a plumber sets fire to a house. These are all examples of a PL claim. If someone trips over a loose carpet or cable in your office, shop or other business premsies, this is also public liability. In addition, cover would apply if you cause a mental injury to someone. Although you cannot physically see the injury, public liability would operate. This is where a lot of the costs associated with liability lay, it is the hurt, pain or suffering and payments made towards this.
Professional indemnity, on the other hand, does not need to have evidence of a physical loss. It covers financial loss. It can operate alongside public liability in that it does not have to be purely a financial loss.
If a third party receives advice or a service from you and as result they suffer a financial loss, then this is P.I. cover. You do not have to have received a separate fee for providing this advise, although this is usually the case.
For example, you may have an information technology or telephony company who are appointed to replace all of your existing IT infrastructure and telephony. If the system they install does not deliver what was quoted, then you may suffer a financial loss through lost sales, reduced productivity or costs associated with purchasing a correct system from another supplier. A physical loss has not happened, but you have lost out financially.
This can apply to many different types of business where the majority of the fee income or turnover is derived from the provision of advice. This advice can either be separate or it can be combined with the provision of a physical product. The IT company above for example will undertake an initial visit to advise the system that is required and then go away to obtain the physical prodcut.
Think of Businessinsure, as an independent business insurance broker, we advise customers on the right policies to by. If this policy does not deliver what you wanted, for example it had a large excess or some other onerous terms, and we had not pointed this out to you, then potentially there is a professional indemnity insurance claim.
As with all liability insurance, negligence needs to be proven in order for a claim to operate. But, and this really is very important, this does not stop spurious claims being made. A spurious claim is one that has no, or very little chance of success, but will cost time and money to fend off.
Most policies will provide cover for the spurious claims as well the legitimate ones.
Why it’s important - examples
Professional indemnity claims are rare. But, as with most liability claims, they are becoming more frequent. Just because thay are rare though, this does not mean that they do not occur, but they are less frequent than run of the mill liability insurance.
However, when we get to the stage of dealing with a professional indemnity insurance claim, the costs are usually very high. Add to this the costs of legal fees and you can see why it can be just as important as other forms of liability insurance.
We are not, thankfully, at the stage of the US insurance market. As a generalisation, a solicitor firm in New York stated that of their turnover, or fee income, one quarter of this is spent on their professional negligence insurance cover.
The spurious claims we talked about can also be quite costly. Imagine deciding that you do not need the cover and then you get a 10 page solicitors letter land on you doorstep alleging a whole host of things that you are accused of doing, or not doing. You may well think, there is no way we can ever be held responsible but once a solicitor has got involved, you really do have to tread carefully to make sure that the claim is dealt with, and repudiated, correctly. This is where your PI insurance will kick in. We will help you defend yourself against these claims as well as the ones that may succeed.
How businessinsure can help
As a broker, we have to have our own insurance in place, otherwise we cannot trade. We understand what limits you may need or may be asked to provide, under the terms of a contract. We can help you discuss a reduction in limit, as many companies simply ask for some way over the top, blanket limit.
Let Businessinsure do the work for you, we can scour the market place on your behalf. A business insurance broker is, and always has been, the best way for you to get a range of quotes.
PLEASE NOTE – We cannot provide quotations for a few types of PI cover, in particular solicitors professional indemnity insurance.
More information
Any business or charity that is providing advice or a service, for a fee, will more than likely have a requirement for professional indemnity insurance. The law of the land may not force you to have this cover, but you may need it to be able to trade. For example, we cannot get FSA authorisation without having adequate cover in place.
You do not have to provide a separate service for a distinct fee, to have a need for professional indemnity. Call us and we help you decide whether you need the cover and can then get quotes for you.
Professional indemnity is provided, as per liability insurance, on a limit of indemnity basis. You buy cover based on different limits, such as £500,000, £1,000,000 all the way up to tens of millions.
Imprtantly, cover can be one of two types. Any one claim, which is better, or in the aggregate.
A £500,000 any one claim cover will let you have, for example, 10 claims at £300,000. Whereas, in the aggregate means this is the total you could have, in any one year. ie you would only be able to have one claim at £300,000 and one at £200,000, over that and you are on your own. Of course in the aggregate is cheaper, but it is not always worth buying.
Make sure your cover is on the correct basis for your business.
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