What is Professional Indemnity Insurance?
Professional Indemnity insurance is designed for professionals who provide advice or a service to their clients. If someone alleges that you’ve made a mistake, overlooked a critical piece of information, misstated a fact or they have misinterpreted you in the course of your work resulting in a financial loss for your client, they may take legal action against you to recover those losses. Whether or not the allegation is true, Professional Indemnity insurance seeks to protect both your assets and your reputation, as well as the contents of your back pocket meaning you can continue running your business without the stress of financial or reputational ruin should a claim arise.
The risk of a claim being made against you isn’t always determined on your skill or level of professionalism. There is always the risk of an unhappy client making a claim against you, and whilst you can’t control this, we’re here to make sure you have some control in what happens next.
A Professional Indemnity claim could arise because you:
- Failing to provide promised services
- Being negligent in rendering professional services
- Providing shoddy, incomplete, or incorrect work
- Making mistakes or oversights
- Any omissions in the provisions of your service
Regardless of the merit of such claims, your Professional Indemnity insurance will pay for your legal and defence costs, as well as compensation payable to the party making the claim, up to stated policy limits.
Going to court to defend a claim might be in your ‘too hard basket’ but consider not going would be an admission of guilt and have worse repercussions on your reputation!
If you have to make your debut in front of the judge, make sure it’s not costing you an arm and a leg!
Do I really need Professional Indemnity Insurance?
If you are being paid to provide your professional advice or service you have a duty of care to your clients, and therefore need to ensure you are adequately protected!
Professional Indemnity cover is necessary for:
- Anyone who provides paid professional advice or services to any business or individual
- Contractors who work for the government or other organisations whereby insurance is mandatory as a condition of the contract
An example of some professions that require PI cover are: health practitioners, IT contractors, management consultants, accountants and real estate agents.
Could this happen to your business?
No matter how good you are at your job, we’re all human and we all make mistakes. Professional Indemnity Insurance allows you to cover yourself if, and when, you do slip up in your normal course of work.
Here is a real-life claim example:
A quantity surveyor attended an onsite meeting and misunderstood the verbal description and specifications of the building project. When looking at the drawings, he had a pre-conceived notion of what was to be plastered and what was not. When the time came to pay, the estimate was out by many thousands of dollars. The Project Manager looked to the quantity surveyor who had made the error and asked him to pay for the variation of cost. The surveyor’s insurer recognised his liability and made a quick settlement offer. Interestingly, the settlement was way more than the fees actually earned for the job. Remember, a $1,000 fee contract can potentially generate millions in liability if something goes wrong.