Professional indemnity insurance, also sometimes referred to as professional liability insurance, provides cover for legal costs and expenses incurred in your defence, as well as any damages or costs that may be awarded, if you are alleged to have provided inadequate advice, services or designs that cause your client to lose money.
Note that alleged is highlighted above. You might not necessarily have done anything wrong but if someone alleges you have they can bring legal action against you. There will obviously be costs involved in proving innocence and defending you along with expert advice to help you through the situation.
Professional Indemnity Insurance provides cover up to the limit of indemnity against any claim (including claimant’s costs and expenses) in respect of civil liability arising out of the business due to:
- Breach of professional duty arising out of negligence, whether by act, error or omission
- Unintentional infringement of intellectual property rights
- Breach of confidence
- Libel and slander
- Fraud and dishonesty of business partners, directors, members and employees
- Cover extends to include defence costs, court attendance compensation, criminal prosecution defence costs, mitigation costs and accidental damage to documents.
You are likely to need professional indemnity insurance if:
- You provide advice and consultancy because your clients can claim compensation if there’s a mistake in the advice you’ve given.
- You provide an expert service in case you make a mistake in designs, plans or calculations.
- You handle people’s information because you could face claims if you accidentally disclose data or infringe on a client’s legal rights.
- A client insists you have it. Many clients will require that you have professional indemnity insurance in place before you can start working for them.
- Your professional body requires it. You might belong to a professional body or industry association where professional indemnity insurance is compulsory.
- Management and business consultants such as marketing consultants, training consultants and education consultants.
- IT professionals including IT contractors, consultants, programmers and developers.
- Technical and engineers contractors including CAD designers, project engineers and offshore oil and gas engineers
- Recruitment agencies and recruitment consultants.
- Designers such as web designers, graphic designers and interior designers.
- Fitness professionals including personal trainers, dance teachers and yoga instructors.
- Teachers and tutors including private tutors