Professional indemnity insurance covers the legal costs and expenses that occur from defending allegations of providing inadequate services or advice to a client. Professional indemnity insurance plans are helpful for companies and professionals to safeguard themselves from bearing the losses for the negligence that has occurred on their part. Professional indemnity insurance covers not only businesses, but also the principal, employee, director, partner or other professional entities. Depending on your situation, there are two types of professional indemnity coverage:
Civil – for professionals, typically where a license is required to operate.
Medical malpractice – for doctors, dentists and allied health professionals.
What does professional indemnity insurance cover?
- Covers for legal claims against professionalism – where it was deemed lacking and caused a monetary loss to a client.It is important to note that this is a claims made policy as apposed to an occurrence wording policy. Under a claims made policy, a policy must be in force when a claim is made. For an occurrence wording policy, a policy must be in force when the incident giving rise to the claim occurs.
- Optional ‘run off’ professional indemnity insurance that provides coverage until the end of the statute of limitations on claims (sometimes for seven years). The policy needs to be active when a claim is made, not only when a business was operating.
What does professional indemnity insurance not cover?
- Existing circumstances – we don’t cover claims or circumstances you know about before your policy starts
- Intentional damage – we don’t cover intentional damage you cause to a third party
- Contractual obligations – we don’t cover costs or expenses caused by you complying with a contractual obligation you’ve chosen to enter into with a client
- Bankruptcy – We don’t cover claims made against you because your business went bankrupt or became insolvent
What industries require professional indemnity insurance?
- Most industries where a license is required to operate
- Medical – doctors, dentists, allied health professionals
- Real estate
- Education colleges
Important factors to consider when comparing professional indemnity insurance cover
- Legal requirements of your industry
- Size of your liability
- Potential damages
- Types of clients
- Number of employees in your business