What are the potential benefits of professional indemnity insurance?

Professional indemnity insurance applies to individuals and organisations involved in providing services based extensively on personal knowledge and skills.

It protects your business against claims for loss by a client or a third party if you make mistakes and are found to have been negligent.

Typically engineers, solicitors, consultants and accountants carry PII, but many self employed are also now choosing to have cover if they provide advice, support or contract auditing.


What does it cover?

PII covers claims against an individual for a breach of a professional duty but, depending on the policy, cover can extend to:


• Misleading and deceptive conduct

• defamation

• Breach of intellectual property rights

• Damages arising from fraud

• Defence costs associated with claims


Insured amounts can vary from £300,000 to £60m depending on the level of risk to which you are exposed.

If you think of some project disasters, these sums are not unreasonable.


What do I need to do?

Prevention is better than correction, so endeavour to ensure you are not in a position to have a claim made against you. This can be keeping up to date with current requirements, especially legal ones, in the fields where you provide advice. Areas such as management systems are not particularly onerous, but those working in environmental or health and safety management have potentially higher liability.


One way to minimise the risk of potential claims is to make sure projects are well documented, particularly in areas of highest risk and where it is important your advice is followed in order to minimise the risk to the client. Also, in any communication you should ensure division of responsibilities is clearly specified and that areas of potential debate are highlighted and dealt with promptly.


Points to consider

The insurer will only respond to claims made while the policy is live. This means you must be insured both at the time the liability arose (when the advice was provided) and at the time of the claim.

This can be a significant issue if problems arise a long time after the advice was given and means you have to consider insurance in your retirement as well as the need to check when changing insurer that they will accept historic liability.

PII does not cover the full range of risks to which a business may be exposed, so always seek advice from a suitably experienced insurance adviser to ensure you have the right level of cover.


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