Professional indemnity insurance offers protection from damages arising from the rendering of or failure to render professional services. Given the possibility that claims may become more common during an economic downturn, the need for professional indemnity insurance cover becomes even greater.
Professional indemnity insurance, also referred to as errors and omissions insurance, protects professional personnel against negligence claims made by a client or third-party. Professionals who commonly turn to this type of liability insurance for cover include architects, home inspectors, solicitors, estate agents and accountants – among others. Because claims become more frequent in a down economy, protect yourself with professional indemnity insurance.
Professional Indemnity Considerations
The need for professional indemnity cover developed due to typical public indemnity insurance policies only responding to bodily injury, property damage, personal injury or an advertising injury claim. Because professionals such as architects, solicitors, accountants, estate agents, technology consultants and others can cause claims without bodily injury, property damage, personal injury or an advertising injury claim, additional cover is needed to fill this gap.
Common claims made on these policies include negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. For example, if a Web design platform fails to perform properly, it would not cause bodily injury, property damage or advertising injuries. Because of this, the public liability policy would not be triggered. But because the Web design platform not performing correctly could directly cause financial losses, and may be attributed to a misrepresentation of the platform’s capabilities, the professional indemnity cover would be triggered.
What Exactly Does Your Business Need?
When buying professional indemnity cover, there are considerations that will determine what you need:
- Is the insuring agreement broad enough to capture all of the current and future work of the policyholder? Determine if the policy covers the scope of your organisation’s professional tasks and services by reading the definition of the covered services in the policy. Sirelark Risk Services can help you determine if all professional tasks would be covered under the operative definition or if additional clauses would need to be added.
- What if there is a sale, merger or change in position at your organisation? There are many changes going on during this down economy. Discuss what these possible changes in services mean for your cover. Is there approval needed to continue cover?
- Are there any exclusions? Look at the list of exclusions that resist cover. Review the list to make sure it does not preclude cover for any professional services or tasks that you need covered.
- Is an extended reporting period an option under the policy? These provisions offer extensions of time to report claims that would otherwise fall outside the policy period – as long as the act/omission resulting in the claim occurred during the policy period. Find out what extended reporting period options are available and discuss how much time the policyholder may need to report a claim.
- Can you create a bespoke policy? Common additional cover includes disciplinary proceedings or reduced retentions and may be of importance to your business.
- Have there been any past tasks or activities at your business that could potentially result in a claim? Have there been past instances where a claim was filed? What was the result? Discussing the specifics of these with a broker can help determine what cover specifications you need now, to prepare you for the future.
Other Ways to Protect Your Business
- Establish a high standard for product and service quality control at your organisation.
- Keep all company records up-to-date and accurate.
- Train employees thoroughly and properly.
- Ask your broker for safety and compliance information.
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The content of this Cover Overview is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2010, 2012-2013 Zywave, Inc. All rights reserved.