Professional Indeminity Insurance

What is Professional Indemnity Insurance?

Professional indemnity insurance protects an organisation or professional against any liabilities and contingencies that can occur because of a mistake or negligence. It is specifically designed to safeguard consultants who charge a fee for their services. Basically, it provides financial protection against claims for financial loss, injury, or damage any violation of their professional responsibilities during their work.

Types of Professional Indemnity Insurance

Here are some types of professional indemnity insurance -

Malpractice Insurance: This covers doctors, dentists, nurses, and other licensed healthcare providers. This might come in handy for experts whose mistakes can cause bodily harm or other problems like sickness, illness, mental injury or even death.
Errors and Omissions Insurance (E&O): It is mainly for business professionals like lawyers, architects, etc. It protects them from financial losses including defence costs caused by negligence, errors, and oversight.
Civil Liability Cover: Civil indemnity covers all risks not covered by standard insurance. Any claim related to defamation, contract breach, slander, libel, intellectual property, and any personal injury resulting from security breaches will be covered. Such coverage can provide financial protection from potentially expensive legal claims. It is important to note that civil liability coverage excludes employer and general public liability.

How Does It Work?

Depending on the profession, professional liability insurance goes by different names, like medical malpractice insurance for doctors and errors & omissions insurance for real estate agents. Such names reflect the type of services that the professional provides and denote the kind of risks that they may face in their profession.

Professional indemnity insurance can't be obtained through homeowners' endorsements, home business policies, or business owners' policies. Consequently, it is important for consultants to research and purchase the right kind of professional liability insurance for their particular business.

You can only file claims within the policy period. In general, these policies work based on a claims-made basis, so only claims filed during the policy period are covered. Any claims made after that will not be honoured.

Professional liability insurance usually covers you against losses resulting from claims made during the policy period if you have made a covered error, omitted something, or acted negligently during the course of your professional business. This means that in case of a claim, you can have peace of mind knowing that you are protected from the potential financial repercussions of your professional work.

Why Have Professional Indemnity Insurance?

"I'll sue you for this" - No professional wants to hear these words from their clients. But what if it unfortunately becomes true?

When a professional deals with clients, there can be cases where they make a mistake or cause harm to the client. In such cases, the professional is exposed to being sued by the client for damages. Professional Indemnity covers professionals for this.

It'll protect you from huge legal bills in case someone files a claim against you. This is why having such a policy is important - it could save you from a financial disaster. Having such a policy in place is not only a smart move but also a cost-effective one, as it could eliminate the hassle of legal battles - allowing you to channel your full energy into the growth and success of your business.

It's specially designed for professionals and businesses whose services are at risk. It helps to protect their services and their reputation.

What Does It Cover?

You are covered for losses arising from legal liability if the claim is -

Because of any mistake/negligent act/oversight of the professional within the geographic region mentioned in the policy schedule;
Filed during the policy period and reported to the insurer in writing and the error occurs before the policy expires.

Please note that any claim or circumstance known to you before the commencement of this policy or that should have been known or informed by you under any other insurance prior to the policy inception or stated in the latest proposal to the company is not covered by this policy.

What Does It Not Cover?

Unless otherwise specified, this policy won't cover the following -

Damage to Property or Injuring Someone
The policy will not cover personal injury or property damage unless the damage or injury is caused by a service you have provided for a fee.
Delay
Any claims arising out of a delay in performing any task that was agreed upon via a contract between the professional and the client, except when the delay is because of negligence. Actual or alleged late deliveries or delays shall not be considered negligent acts, errors, or omissions.
Directors and Officers and Employment Liabilities
The policy won’t cover any claims -

Against your director or officer in the course of their official duties.
Resulting from your obligations as an employer or potential employer to any employee, including disputes over wrongful dismissals, unfair dismissals, contracts of employment, training contracts, retainers, etc.
Whether from an employee or someone else, about sexual harassment, racial harassment, molestation, discrimination or victimisation based on gender, race, disability, sexual orientation, religion, age, etc.

Punitive Damages:
Any claim resulting from -

Fines, taxes, penalties, or other multiple compensatory damages; or
Any other damages regarded as uninsurable by law, such as restitution, offset, or return of fees or expenses paid to you.

Insured Vs Insured
Any claims made by another insured against you.
Intentional/Dishonest Acts
Any intentional, dishonest, fraudulent or criminal act that results in a claim.
Insolvency
Any claim against you that is based on or attributable to your, your suppliers’, or your subcontractors’ insolvency.
Intellectual Property Rights
Any claim related to the infringement of any confidential information or intellectual property like copyright, trademark, etc.
Warranty
Any claim arising under any warranty or under any contractual obligation where the obligation results in a claim or loss that you would not have been liable for without the warranty or contract.
Libel And Slander
Libel (a false statement published that hurts someone's reputation; written defamation) or slander (making a false statement to hurt someone's reputation) or otherwise defamatory statements made by you or any other third parties including sub-contractors.
Virus:
Any claim resulting from -

Computer viruses, worms, or similar damaging or malicious code, whether created or transmitted (directly or indirectly) by you, or
Computer hacking, denial of service attacks, or other computer misuse that causes damage to you or anyone else.

Loss of Document
Any loss, damage, or destruction of documents, or expenses you incur while replacing or restoring them.
Nuclear Pollution and War
Any loss, injury, or damage directly or indirectly caused by -

Asbestos
Radiation, contamination from radioactivity, nuclear fuel, etc.
Toxic, explosive, or other hazardous properties of an explosive nuclear assembly.
Discharge, dispersal, release or escape of pollutants.
War, acts of sabotage, civil disorder, etc.

Terrorism
Loss caused by terrorism. Here terrorism refers to an act, including force or violence and/or threats thereof, committed by someone or a group of people, whether acting alone or on behalf of a company or government, for political, religious, ideological or similar reasons, including the intention of influencing a government and/or putting the public, or any section of the public in fear.

Also excluded are losses of any kind caused by or related to any act of terrorism. Please note that it is your responsibility to prove the contrary if the insurer claims any loss isn't covered by this insurance because of this exclusion.

Making A Claim!

Here are the steps you need to follow if you want to make a claim under a professional indemnity insurance policy -

You need to first notify your insurer in writing immediately, so they can process it as quickly as possible. You should also inform them if you've received any legal notices.
Next, fill out your claim form and send it to the insurance company with the right documents.

Here's what your insurance company needs:

A duly filled claim form
Copies of any communication like emails, letters, file notes, or any legal documents such as a writ.
Claimant and involved party details.
A detailed outline of the problem.
The potential value of the claim.
Registration certificate of the professionals.
Certificates for institutions like hospitals.
Details of the insured to determine the extent of the money loss.

Once you have submitted the required paperwork, the insurance company will evaluate your case to determine if it is valid and respond accordingly.
There's always the option of going to court if you're unhappy with the insurance company's decision.

How To Choose The Right Professional Indemnity Insurance?

Here are some of the things to remember before you select your ideal policy -

Complete Coverage
Your professional indemnity policy should provide adequate coverage for all the potential risks to your business and its activities, based on your specific services or work. Ensure it is tailored to your business - so you are fully protected from any unforeseen circumstances.
Pick The Right Limit Of Liability
Make sure your professional indemnity policy allows you to customise your limit of liability or sum insured based on your business size, nature and number of employees. This is important because if the limit of liability or sum insured is too low, it may not cover all the costs of a claim against you. On the other hand, if it is too high, you may be paying for coverage that you don't need. So, it's important to strike the right balance.

To figure out the right quantum of liability for your profession, it’s advisable to talk to a financial advisor or insurance broker. You can always reach out to SMC experts to make the best decision!
Easy Claims Process
It's important to find a company with an easy claims process since it can save you and your business a lot of stress. An efficient claims system can provide you peace of mind, knowing that you can get assistance quickly, when needed.
Extra Service Benefits
Some insurance companies offer a variety of other benefits, like 24X7 customer service, user-friendly mobile apps, etc. These additional services can make it easier for you to have access to their insurance information when you need it most. Therefore, when selecting an insurance provider, carefully consider their offerings to find the one that best suits your needs.
Compare Different Policies
Saving money is always good, but the cheapest policy might not be the best choice. It's important to look at more than just the price tag when making a decision - consider the coverage and make sure you get the protection you need. Be sure to compare and weigh the features and premiums of each policy. Choose a policy that offers the most comprehensive protection and value for your money.

Who Needs A Professional Indemnity Policy?

Investing in a professional indemnity policy is a good choice if -

You are a professional.
You charge a fee for your services.
There is even a remote possibility your client can sue you or claim damages in court for negligence or a mistake.

Other Important Aspects Of A Professional Indemnity Policy

Here are some of the key facets of a professional indemnity policy that you need to be aware of -

Retroactive Dates
Some insurance policies have a retroactive date clause. Basically, this is the time before the policy commences. Considering that the policy only covers financial losses incurred during the tenure, the retroactive clause gives you the opportunity to claim the sum insured for any mistakes that happened during the retroactive period. This provides a sense of security and assurance that any losses incurred before the policy even started will still be covered. Please note that you must request such a claim during the policy period.
Tail Reporting
Some insurance providers also have tail reporting clauses. With this clause, you get to make claims for incidents that occurred during the policy period but weren't notified until after the policy expired. So, this allows you to extend the coverage of your policy beyond its expiration date, ensuring that you remain protected even after the policy ends. This will only apply if the policy wasn't renewed for that period. But, this feature entails higher premiums, which are determined at the onset of the policy.
Transferring Retroactive Dates From The Old Insurer To The New Insurer
Here, the new insurer undertakes the responsibility of covering any claims that might arise from the old insurer’s policy tenure. The claim will be covered if there is no gap between the old coverage and new coverage.