Recently we have been asked why Professional Indemnity (PI) insurance is required. Wanting to ensure the information we supplied was accurate we got to work researching PI insurance.
What is Professional Indemnity insurance?
PI insurance protects companies against any compensation to a clients, should a claim be brought against them for professional negligence. These can include;
- Breach of contract
- Incorrect and inaccurate professional advice
- Financial loss through negligence
Do I need Professional Indemnity insurance?
If you are providing advice, services or designs to a client PI cover would be recommended. Should an allegation against you come about that suggested you provided an inadequate service, that leads to a potential professional negligence claim, your PI insurance would provide cover for legal costs and expenses, associated with defending a claim (subject to policy terms and conditions).
Although you are not legally obliged to have PI cover, the protection and security it can offer should a claim be brought against you, could save you thousands of pounds in compensations and costs awarded to your client.
Companies protect themselves with Public Liability (PL) and Employee Liability (EL) and PI insurance should be no different. PI is there to protect you and your business should a claim be brought against you for professional negligence.
Respectful businesses do not knowingly set out to provide inadequate service or poor advice, but it is a possibility. In the unlikely event you are called into disrepute the effects can be costly, not just in monetary terms. As an engineering company promoting safety the information we provide to clients is promoting best practice, based on what we see at that moment. Should the information we provide turn out to be incorrect and an accident occurs our PI insurance would be there to cover our legal costs and any compensation that may be awarded.
Wanting to make sure we bring independent advice, we asked independent insurance brokers, Paul Schofield of Donald Schofield (Pontefract) Limited to provide a statement;
“A Professional Indemnity policy is an insurance product that is designed to protect professional people against potential claims for injury, damage or loss caused by professional incompetence or negligence. A company or individual in business that holds Professional Indemnity insurance, will have the knowledge and backing that by having this type of insurance cover in situ will ideally provide financial protection against any claims made against them including legal defence (subject of course to Policy Conditions etc as with every insurance policy).
Professional indemnity insurance is highly recommended to Companies or Individual businesses if they are providing advice or professional services to their own clients (including consulting or contracting), or other industries if that Company or Individual provide say professional designs to their clients i.e an architect or design engineer etc.
Having an insurance policy that covers a professional for their work is important because it allows them to offer services with the knowledge and peace of mind that they have an insurance policy in place should they have a claim brought against them for any proposed professional negligence, and particularly as we live in a ‘litigation society’. Should a Company or Individual have a claim brought against them for proposed or alleged professional negligence and they do not have professional indemnity insurance cover, then they would still have to deal with that claim themselves – but without the professional expertise of how to handle such a claim legally and also to bear in mind the likely time to administer a claim themselves, plus ultimately there financial cost implications to them and their business.
Professional indemnity insurance isn’t compulsory under the law, but the rules of some regulators and professional bodies mean it’s compulsory for some professions, including solicitors, financial advisers, accountants and architects. It’s also required by some client contracts, where applicable. Naturally like all insurance policies this can be a recommendation of course, but other than the insurance covers a professional indemnity policy can provide, it also demonstrates good risk management by a company or individual of their business model.”
Is the risk worth it?
Amy Kent – Managing Director