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Office Risk Insights: Professional Indemnity Cover

As a professional, you are expected to provide quality services within the accepted standards of your profession. However, despite your best intentions, mistakes or misjudgements are bound to occur and can have serious consequences. Clients could sue you or your company, and in addition to paying to defend yourself in court, you would also be responsible for potentially extensive compensation costs if found at fault. If you fail to protect yourself against this liability, the consequences for your business could be financially devastating.

Professional Indemnity Cover

First and foremost, you can protect yourself with professional indemnity insurance cover. In the event of a claim, this policy will cover defence costs in court and any monetary damages awarded to the claimant if you are found at fault.

However, just purchasing cover is not enough. You will also need to engage in effective risk management as well as report claims on first knowledge. Reporting and responding to claims immediately by developing an appropriate response plan can ensure that you have the best chance of a favourable outcome.

Quick Response Plan

Your best risk management defence is to craft a very specific plan for responding to professional indemnity claims. The following elements should be addressed in your plan:

  • Report the claim to your insurer as soon as possible and in accordance with the requirements of your policy. Insurers will accept verbal notifications and written notifications. Late notifications could void your cover and enable insurers to not pay the claim.
  • Insurers will appoint a legal defence team to represent you in the claim. Insurers may identify or hire an expert. The claimant will generally hire an expert witness to testify that you breached your professional duty, so insurers will have an expert defend your work. This could be a third party or even someone from your firm.
  • Consider gathering documents, taking notes and photographing anything relevant to the claim.
  • Designate a claims management project team within your office. Who will assemble and review documents, chronicle events leading up to the claim, communicate with involved parties, attend depositions and perform other necessary duties?
  • Assemble documents and stay organised. A large claim can be very time intensive, but the more organised you are with documents and timelines, the less it will cost you in lost hours.

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The content of this Risk Insights 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, 2019 Zywave, Inc. All rights reserved.

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