Professional indemnity insurance to protect your business

May 30, 2010 · Filed Under Professional indemnity insurance 

Whatever the nature of your business, you have probably worked hard to get to where you are today. Yet did you know that all that hard work could typically be obliterated by just a moment’s bad luck or human error? Welcome to the domain of professional indemnity insurance (PII)!

A moment’s misfortune

It’s typically a basic principle of legal action that a lack of intention does not in itself remove liability.

What that means is that however much you may have tried to avoid it happening, if you cause damage to a client through accident or professional negligence then you may be vulnerable to having damages awarded against you.

In some cases this could all revolve around an error happening in just a second or two. Accidentally losing that highly confidential client data or sending very commercially sensitive information to the wrong company, are just some of the things that could land you in very hot water.

Of course, the problem may be more systematic. Perhaps you’ve been unlucky and find you are unable to meet your commitments due to circumstances beyond your control. The problem is that your client may not see it that way and hold you to be in breach of contract due to professional negligence.

Whatever the cause, if your client launches a legal action for damages against you then you’ll typically start seeing some major costs mounting up very quickly.

Professional indemnity insurance

This form of protection typically offers help in two respects:

  • legal and related costs (you may incur these even if the action is subsequently dismissed or you win);
  • covering subsequent awards against you.

As with any form of insurance, these policies have their own specific conditions and terms. The exact circumstances of cover and the amounts involved will typically vary amongst providers and it may be a sensible idea to peruse these closely before making any final purchasing decisions.

Note that although your intentions may or may not be a factor in a court finding against you, they may well have an effect on your insurance. Some types of cover are only available if the actions that lead to the claim were categorised as accidental – typically all professional indemnity insurance policies may not cover criminal actions or malicious and intentional damage caused to a client.

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