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Wednesday, 3 June 2015

What is Professional Indemnity?

Regardless of how many years’ experience a business has, there is always the possibility a member of staff could make a mistake. Before, people like accountants, surveyors, engineers, solicitors and architects, were regarded as 'professionals' but now the term ‘professional’ is often regarded as any person who offers specialist advice or services.
Professional indemnity insurance helps protect a business from claims made by dissatisfied clients. Even if you haven’t done anything wrong, the cost of defending yourself may be high and professional indemnity cover can help you protect yourself from these costs too.
There are three types of Professional Indemnity:
  1. Negligent act, error or omission - this indemnifies the policyholder against loss/circumstances incurred only as a result of their negligent act, error or omission in carrying out the policyholders business. This is the narrowest form of cover.
  2. Breach of duty – a  typical Professional Indemnity policy will provide indemnity to the insured against loss arising from any claim or claims for breach of duty which may be made and reported to the insurers during the policy period by reason of any neglect, error or omissions committed in the conduct of the insureds professional business. Some policies are more tightly worded than others and whilst a number of policy wordings are designed to satisfy a stated minimum approved wording, which makes them easier to compare, others differ dramatically in the cover they provide.
  3. Civil liability - Some Professional Indemnity policies go further than the standard cover and provide indemnity 'for any civil liability'. This covers such areas as breach of contract, libel and slander. The operative clause of a 'civil liability' policy is so wide, that there is normally a long list of exclusions in order to exclude liabilities that should be covered elsewhere - otherwise things like Employers Liability and Public Liability might be covered.
Choosing a professional indemnity insurance limit depends on your businesses circumstances. Cover can be offered on an annual aggregate limit for all claims or it can be applicable to each and every claim or any one claim without aggregate limit.  Often, customers or clients will specify the level of cover you need but if they don’t, then it’s wise to enquire about their expectations before starting a contract.

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