Thinking about professional Indemnity Insurance

June 30, 2010 · Filed Under Uncategorized 

If you do any type of freelance or consultancy work, either on your own or as a member of a small business team, then professional indemnity insurance (PII) may be something that could help provide you with financial protection against being found liable to pay damages to a client.

PII can typically provide cover for a wide number of professional occupations including:

  • IT contractors;
  • consulting engineers;
  • management consultants;
  • legal professionals;
  • forensic consultants;
  • photographers.

Professional indemnity insurance provides financial assistance in the event that a client or ex-client sues you to recover losses that they believe were caused, somehow, by you.

Typically this may be as a result of:

  • unintentional intellectual copyright infringement;
  • accidental breach of confidentiality;
  • defamation;
  • libel or slander;
  • loss of documents or data;
  • errors on your part;
  • etc.

If the end result is that your client’s business has suffered financially or from a loss of reputation attributable to you then you may sued.

PII can cover the cost of damages awarded against you as well as legal expenses and fees (limits may apply).

For some professions e.g. legal, PII may be mandatory. Some clients may insist that you have PII even though it may not be a legal requirement for the services you provide.

Premiums will vary, depending on the level of income you have and the amount of cover you opt for.

A sensible approach to PII may be to opt for the most comprehensive level of cover you can afford. If very basic, you may have to find the shortfall yourself should a case for damages be awarded against you.

Over time, perhaps as the nature of your work changes or your business expands, it may make sense to revisit your level of cover to ensure that it still matches your needs.

Another point to remember is that if you stop working and cancel your insurance, your cover may just stop. The nature of your work may be such that problems may take some time to appear so you could still be at risk from being sued.

You may see this referred to as run-off cover.

In a similar vein, work carried out prior to PII being taken out may also need to be catered for. This may be known as retroactive professional indemnity insurance cover.

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