Professional Indemnity Insurance (PI)
What is Professional Indemnity (PI) Insurance?
Professional indemnity insurance is a product designed to respond to claims from a third party (e.g. your client) because of actual or alleged negligence, acts, errors or omissions from the advice or professional services you provided to them.
What is the purpose of Professional Indemnity Insurance?
It offers protection from the expensive legal defence cost and damages payable in the event your client (or a third party) makes a financial or legal demand against your business from the professional services or advice you provided to your customers.
Professional Indemnity Insurance: designed to cover the financial loss associated with claims from professional negligence
What is an example of a Professional Indemnity claim?
This question often relates to claims and because this type of insurance can cover a variety of different industries, we have provided a broad overview below to assist understanding:
- Your business provides advice or professional services to your clients
- After receiving advice from your business your client believes they have suffered a financial loss (whether actual or alleged)
Your client may take some of the following steps to threaten or instigate legal action or a financial demand against your business:
- During a meeting and/or telephone call
- Written correspondence (via email or post) from your client
- A formal legal demand from a lawyer sent to your business
- Notices from the Courts demanding your attendance on the allegations
When the above situations occur, your business might be able to work with your client to resolve their concerns commercially to reach an agreed solution. If this is not successful or even possible then you will need to engage a lawyer to assist with defending against the allegations made or to achieve a solution between all parties.
The costs associated with engaging a lawyer can often be too much of a financial burden for most businesses. Also, there is no guarantee that your lawyer is a specialist in managing the type of allegations being made. The benefit of having Professional Indemnity (PI insurance) is that your insurer will engage a lawyer from their panel that is an expert at defending the types of claims made against your unique type of business. What this means is that outside of payment of your excess to the insurer all other aspects of the claim that fall within your policy coverage will be paid for by the insurance company. This offers a great peace of mind for most businesses during what is a very stressful time.
Some specific insurer claims examples are available from the Berkley Insurance Australia website here who are an insurer that specialise in Professional Indemnity Insurance for a range of industries:
https://berkleyinaus.com.au/wp-content/uploads/2023/09/Professional-Indemnity-Claims.pdf
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