CIPFA insurance requirements and professional indemnity cover
Professionals working in the field of accountancy have to abide with a number rules and regulations, not least those laid down by industry bodies. The CIPFA or Chartered Institute of Public Finance and Accountancy has its own requirements which include that practising members have professional indemnity insurance in place. CIPFA insurance requirements are similar to those laid down by other accountants’ organisations.
The market for professional indemnity insurance is quite broad and the product should not be confused with other types of professional cover such as public liability insurance, although this can be included with some indemnity plans. Employer’s liability insurance should also not be confused with this brand of cover, although this can often be bought from the same firms which supply indemnity protection.
In short professional indemnity insurance will pay the policyholder’s legal costs in the event they are sued. As far as accountants are concerned this can happen if a client feels that the advice they have received has been ineffective or worse still has cost them money. Legal cases can also be launched if a client feels they have actually been the victim of a mistake made by an accountant or accountancy firm.
Subject to certain limits laid down in each policy, CIPFA insurance cover will pay the cost of someone’s legal defence and also pick up the bill for any compensation which might be awarded against the policyholder if they lose a case.
Provided they were honest, IE not malicious, all professional mistakes committed by an accountant or accountancy firm will often be covered, and the wording also often includes omissions, acts of negligence, and infringement of intellectual property rights or of confidentiality. Protection is also often provided for the likes of allegations that a policy holder has somehow defamed someone through libel.
Should an accountant or accountancy firm lose important documents or data belonging to a client, they will also be covered against any legal action. CIPFA insurance requirements are not only designed to make life easier for an accountancy professional in the event they face legal action, but also to potentially make doing business in easier. Many potential clients may not consider a company which does not have the relevant Indemnity Insurance in place.
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