WHY PI? WE ANSWER YOUR QUESTIONS ON PROFESSIONAL INDEMNITY INSURANCE
Building your brand, your reputation and goodwill we’re guessing was your biggest business effort so far. Aside from your natural talent, your inspiration was matched, if not outweighed, by your perspiration in terms of the effort and energy to get where you are today. So, as you’ve invested so much both personally and professionally to make your business a success, it’s essential to protect it in view of the “claim culture” that exists today.
Let’s take you deeper into the world of professional indemnity and explain why it so important for you and your business.
WHAT IS PROFESSIONAL INDEMNITY INSURANCE?
Sometimes referred to as professional liability or errors and omissions (E&O), professional indemnity insurance is a specialist insurance providing protection to professionals in the services industries. Occupations include:
- Medical Consultants
- IT consultants
- Management consultants
- Events planners
If a client, or a former client, is of the opinion that you gave them bad advice which subsequently resulted in suffering financial or reputational damage, or if they feel that the quality of the service you gave them was less than they were expecting, they may choose to sue you. Importantly, Professional indemnity insurance would cover the financial losses incurred during the course of any legal action against you or your company, and will respond to any claims relating to your alleged negligence, malpractice, error or omission (oversight). This is very different to a general liability policy, which would only cover physical injury or damage caused by an insured event, so it’s important to recognise that even if you have Liability insurance in place, the risks are distinctly different and your liability policy would not pick up such claims.
WHY PURCHASE PROFESSIONAL INDEMNITY INSURANCE
This isn’t necessarily a business that’s mandatory so it’s more often than not a choice to purchase, but that doesn’t mean it should be overlooked. If you’re undecided, it’s perhaps time to ask yourself three key questions:
- Is your business based on offering any kind of professional services to your clients? And if so, could an unintentional error lead to them suffering financial or reputational damage?
- Do you give any advice that, if misinterpreted, could lead to a client alleging professional negligence?
- Do you have access to confidential, sensitive client information?
If your response to any of these questions was “yes”, it’s recommended you take out PI insurance to protect you in the course of your business. Any service provider would benefit from this cover: however, note that if you’re in the medical or legal profession, this type of insurance is typically referred to as malpractice insurance and can be a mandatory requirement for licencing purposes.
WHAT WOULD MY PROFESSIONAL INDEMNITY INSURANCE COVER?
As a professional, doubtless any error made or oversight committed would be accidental/unintentional, and as such, your professional indemnity insurance would pay for your legal costs in defending any claim made against you. It will also cover any damages that the court might award to the person bringing the claim against you, or the agreed settlement figure if both parties agree to settle.
The type of errors &/or omissions your policy covers typically include:
- Poor advice or professional negligence: Even the most skilled or experienced professionals can make mistakes that others could consider to be negligent. For example, an accountant miscalculating the amount of tax that is due, a wedding planner ordering the wrong flowers for their client’s wedding, or a lawyer saying it’s best to settle a matter in court rather than out of it and it ends up costing their client more in damages. Whatever the circumstances, if negligence is proven then you would be held responsible.
- Breach of confidentiality (including copyright infringement): If you hold any information on your customers and accidentally release it without their prior permission, you are in breach of data protection and confidentiality regulations and if this causes harm, loss or distress, they could sue. If the info you shared included sensitive confidential product or design details, this is classed as protected intellectual property, and as such you may be in infringement of copyright too.
- Misrepresentation: If a promise or guarantee is made to provide a specific outcome or defined level of service, and this is not delivered, a claim could be made for misrepresentation.
- Breach of contract: Put simply, if you enter into a contract and don’t honour your obligations, the other party has every right to bring a lawsuit for breach of contract, and if your failure to perform or honour was a genuine oversight, your professional indemnity insurance may be called upon to cover your legal losses.
- Defamation acts: Spoken or written falsehoods or misinformation resulting in reputational damage to your clients is known as libel or slander, so always take care in all corporate communications as either are grounds for a claim against you or your company.
SO HOW MUCH WILL IT COST?
We can’t give you a firm figure, as this varies according to:
- The size of your business
- Experience and qualifications
- Type of business and tasks undertaken
- Claims history
- Level of cover required
But let’s just say, whatever the premium, it’s way cheaper than paying for a lawsuit to defend yourself or your business: especially if you lose!