Professional indemnity insurance
When you set up in business to sell services based on your particular skills or knowledge, your customers have a legally enforceable expectation that the advice and recommendations included in your services are professionally reliable. That is to say, your customers have a right to the provision of services that are at least as sound and reliable as from anyone else claiming the same degree of professional skill and knowledge.
If your customer – whether a private individual or another business – suffers loss or damage as a result of the professional services you have provided, the customer can seek to establish your liability for the loss or damage suffered and claim compensation. Professional indemnity insurance covers you and your business against the financial losses of such claims.
There are a surprising number of pitfalls that can lie in wait for the business involved in the provision of professional services. Probably the most likely that spring to mind are the claims that certain advice has arisen from the provider’s negligence, error or omission and, as a result, has caused the customer or client some degree of loss or damage. But there are other liabilities, too. A report, advice or recommendation may have infringed another’s intellectual property right or perhaps breached a confidentiality or confidence. In more extreme cases, libel, slander or defamation may have been committed in the course of providing services. This is also an area of business in which the loss of critical data or documents can cause considerable loss or damage to clients, who will then have recourse to compensation from the offending business.
The maintenance of professional standards and integrity is such that many professional bodies will insist on professional indemnity insurance for any of its members carrying out a business in the name of that profession. Thus, solicitors, accountants, financial advisers, mortgage intermediaries, insurance brokers, and architects will all find that they will need to demonstrate adequate professional indemnity cover in order to practice their professions.
A particular peculiarity of professional indemnity insurance is that it is typically written on a “claims-made” principle – that is to say, that claims will be entertained only while the cover is still in operation. If you are planning to cancel such a policy because you plan to sell the business or are about to retire, therefore, it is important to arrange suitable “run-off” insurance protection to safeguard you against any claims that might be received after the principal professional indemnity insurance has expired.
