Engineers are responsible for designing and implementing complex systems, infrastructure and machinery that can significantly impact public safety across New Zealand.
Even the most experienced engineers can make mistakes or experience misunderstandings that can result in professional liability claims.
As you will see further down in this blog, these claims can be expensive.
Fortunately, Professional Indemnity insurance is there to protect you in these situations.
This blog will discuss what is and isn’t covered by Professional Indemnity insurance and examine why engineers might consider this important type of cover.
What is Professional Indemnity insurance?
Professional Indemnity insurance provides indemnity for professional errors and negligence.
Importantly, it provides legal defence costs and cover for any awards or settlements if a claim is made against you.
It also typically covers costs associated with claims investigation and any public relations costs you may incur to protect your professional reputation.
While many things are included, some risks are not covered by Professional Indemnity insurance, including intentional damage, bodily injury, and property damage.
It also will not cover fraud, dishonesty, or any claims that involve circumstances known beforehand.
Are engineers required to have Professional Indemnity insurance in New Zealand?
In New Zealand, engineers are not legally required to have Professional Indemnity insurance. However, many engineers choose to carry this type of insurance to protect themselves and their businesses from potential liability claims.
As mentioned before, without this insurance, an engineer may be personally liable for damages, which can be financially devastating.
In addition to providing financial protection, Professional Indemnity insurance for engineers can also help to build trust with clients and regulatory authorities.
It is worth noting that some clients, particularly government agencies and larger corporations, may require engineers to have Professional Indemnity (PI) insurance as a condition of working with them.
Even some associations may require you to hold a certain amount of cover as a requirement to join.
So, while it is not mandatory, in these cases, having this insurance may be necessary to secure work.
Not only that, but having this insurance in place can demonstrate a commitment to responsible professional conduct and give clients peace of mind knowing that potential liabilities are covered.
Ultimately, the decision to obtain Professional Indemnity insurance is up to individual engineers and their businesses.
It is worth considering the potential risks and benefits of carrying this type of insurance, particularly for those who work on high-risk projects or with high-value clients.
Ethical obligations for engineers
In New Zealand, engineering is a regulated profession that requires practitioners to be registered with the Engineering New Zealand professional body.
Engineering New Zealand has a code of ethics that its members are expected to adhere to as part of their conditions of signing up.
These standards include:
- Acting competently
- Behaving appropriately
- Informing others of the consequences of not following advice
- And maintaining confidentiality
Carrying Professional Indemnity insurance can help engineers meet their ethical obligations by providing a financial safety net if they are found liable for damages caused by their work.
Real-life claims example*
Here is a real-life claims example that shows the importance of Professional Indemnity insurance for engineers.
An engineer was project managing a job that involved constructing a group of retirement homes and an adjoining clubhouse.
The client alleged that the project manager caused them to pay a construction invoice for subcontractor fees under the mistaken belief that the entire sum was payable.
They also alleged that the amount paid exceeded the total amount payable.
The matter went to mediation, and a settlement figure of $750,000 was reached, plus $100,000 in legal fees.
Fortunately, the engineer’s Professional Indemnity policy kicked in, and the insurer covered the amount.
The bottom line
Engineers play a crucial role in the Land of Long White Cloud.
By applying scientific and mathematical principles to design, develop, and maintain systems and structures that improve the quality of life for people, engineers are involved in a wide range of fields.
However, this puts them at significant risk when providing their essential services.
Professional Indemnity insurance is there to protect engineers from various situations, so they operate without the financial burden of making a mistake.
To get quotes for Professional Indemnity insurance from a range of leading New Zealand insurers, consider checking out BizCover today.
*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover. © 2023 BizCover Limited
