Professional Indemnity Insurance

Professional Indemnity Insurance

Professional Indemnity Insurance is a broad class of insurance policy that is meant to insure liability professionals face at work.  This includes coverage for legal defense and amounts awarded in court to the plaintiff if the professional should be found liable for damages.

In today’s litigious world, updated knowledge, strong documentation, and other risk management practices are not enough.  Clients are getting more trigger happy with lawsuits and lawyers are getting more expensive.  Professionals should purchase this valuable coverage as part of their risk management strategy to reduce the crippling effects of an expensive lawsuit on their business.

In general, there are 2 main classes of professional: medical professions and advice or counselling professionals.  Medical professionals include people like doctors and dentists.  Advice or counselling professionals include occupations like engineers, insurance brokers, lawyers, realtors, accountants, consultants, recruitment agencies, and many others.

As a professional, you are required to perform at a level that reflects your specialized training measured against your peers and your clients depend on you for accurate advice and services.  If you fail to properly provide these services due to negligence, your clients could sustain heavy financial losses or bodily injuries.  To recover this money, they would need to sue.

Aside from negligence, most lawsuits we see allege defamation, copyright infringement (especially in the case of IT or marketing professionals) and breach of privacy (especially prevalent amongst recruitment or medical professionals).
Medical professionals protect themselves by purchasing a special type of Professional Indemnity Insurance called Medical Malpractice Insurance.  Other professionals have specialized policies meant to reflect the unique nature of their occupation and the hazards that come with it.

If you are on the receiving end of a lawsuit from a client and you carry professional indemnity insurance, your insurance company will spring into action to offer a variety of protections.

Payment of Damages

If you should lose in court, the insurance company will pay for compensatory damages awarded against you up to your policy limit.  Sometimes, fines and other regulatory or punitive damages will be covered as well depending on the insurer.

Defense Costs

Your insurance company has the right and duty to step in and defend you in court.  Because the insurance company is responsible for paying damages if you lose, they have a vested interest in hiring the best lawyers possible, bring in expert witnesses, and take other actions as appropriate to make sure you win or at least face as little liability as possible in court.

One of the main advantages of carrying this insurance is that they will do this even if the lawsuit against you is frivolous or meritless.

Worldwide Coverage

Today, professionals do business with clients all over the world – especially if you’re an internet business or a consultant.  To reflect this growing need, many insurers will extend coverage to insure your professional liability on a global basis.

Historical Coverage

Similarly, most policies will also cover liability arising out of services rendered in the past – usually limited to a few years before the policy’s inception date.  If you do choose this coverage, the underwriter might require more information and take a deep dive into your business history before offering it.

Exclusions

As you can see above, the coverage provided is pretty comprehensive.  If you require any special coverage for an exposure that is unique to your profession, you can usually get it.  But there is an important exclusion on all policies: there is no coverage for intentional acts.
This goes without saying but if you are sued for purposely harming a client, the insurance company will deny your claim and will not offer any of the protections outlined above.

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