What is Professional Indemnity?February 10th, 2018
Professional indemnity insurance is an essential protection for those working in professions where they give advice or provide a service, such as law or accountancy. No matter how long you have been practicing there will always remain the potential for an error or moment of misjudgment. If that should happen to you then professional indemnity insurance provides protection against the consequences.
What kind of situations are covered?
• Professional negligence. If you have made a mistake in work done for a client, provided substandard advice or inadequate designs then professional indemnity insurance could provide cover should a client decide to take action against you.
• Data loss. You could also be covered in a situation where key client documents or data have been compromised or lost.
• Confidentiality and copyright. Clients who work with those in the professional sphere often require strict confidentiality and have multiple protections in place, such as copyright. If these are unintentionally breached then professional indemnity insurance could provide protection.
• Libel and defamation. Claims for either libel or defamation can prove to be enormously costly, especially where reputation is at stake. Professional indemnity insurance provides a buffer against such claims.
What does professional indemnity insurance actually do?
If you find yourself in a situation where you’re being sued for professional negligence, for example, professional indemnity insurance provides a way to help manage the costs. It covers the costs and expenses that are involved in defending an action that has been brought against you. It will also cover the compensation that is due to the client in order to make good the mistake that you made.
Who requires professional indemnity insurance?
If your business is involved in providing designs, advice or service to clients then professional indemnity insurance could be an essential protection for your business. Clients form the foundation of any business and these relationships – no matter how long standing – can often prove to be fragile where there has been an error in judgment or a mistake in the work. If there is professional indemnity insurance in place then it is often much easier to put the issue right without permanently damaging the client relationship. Most clients will be able to forgive and move on from a wide range of errors if they’re very rare – but few will stay loyal if they lose out financially as a result.
Is it mandatory to have professional indemnity insurance?
Membership of a range of professional bodies may require that a firm has professional indemnity insurance in place. If your business works on a contracts basis then you may also find that contracts aren’t awarded to those who don’t have professional indemnity insurance cover. Even if professional indemnity insurance isn’t mandatory for your business and the work that you do, it is still worth considering. It could support the ongoing progress of your business even if the worst happens and you make a mistake.
If you’d like to find out more about professional indemnity insurance for your business please get in touch with Morgan Richardson today.