This post covers common misconceptions about Professional Indemnity (PI) Insurance. We hope you find the explanations and information useful. If you would like to discuss this further, please get in touch.
1. FREE advice doesn’t mean you’re FREE from responsibility
Many assume Professional Indemnity applies only to professionals who charge for their services. You may not sue if you are doing a preliminary design for a quote or writing an article ‘on spec’. Any professional who renders a service to clients has a duty to them. They have to give their clients the best advice from their expertise. You could be sued for negligence if your advice results in a loss to clients, even if you gave it freely.
2. Claims are not limited to just the cost of your fees
If a client loses money due to your services, they may not only be entitled to the fee you charged but also to any other or related losses. And these losses, deemed to be caused by professional negligence, maybe more than the contract value.
3: Disclaimers limiting liability carry little or no protection
It’s not as simple as it seems. Many liabilities cannot be excluded or limited. Wording can be challenged in court. Sometimes, ‘onerous and unusual’ terms may be ignored. Professional Indemnity Insurance can provide additional protection and typically includes legal advice to help you understand how a disclaimer may or may not protect your interests.
4: Client approval doesn’t replace the need for PI cover
Your business may be sued for negligence or breaching a duty to care, even if your work has been approved and signed off by qualified employees. The business that employs employees is responsible for their work. However, a subcontracting limited or sole trader who produces reports, designs, or other advice for clients is still protected. They can be sued even after the initial work is completed and signed off.
5. While in effect, contracts don’t provide PI protection
Professional Indemnity, unlike most policies, is also known as “Claims made”. This means you can be persued even if you’ve provided services for a long time. You will not be covered if your policy is cancelled after a claim. After you have provided your services, professional indemnity must be maintained. This is often a condition of certain contracts.
6. Just because you think it won’t hold up in court…
Even if it seems obvious the loss was not your fault, legal fees associated with defending a claim can quickly add up and bring down a company. A Professional Indemnity policy can respond immediately after your client makes a claim. This guides experts and specialist solicitors and can save you significant money.
7. PI Insurance isn’t limited to financial loss!
Modern Professional Indemnity policies include various additional features. These extra features include protection against claims that you have violated another person’s intellectual property, misrepresented the client, damaged their reputation or otherwise acted dishonestly. Different industries are exposed to different risks, so it is worth receiving a quote to see the various cases that a policy would cover.
Ross Whatnall
Ross Whatnall is CEO and co-founder of GSB and a highly experienced private client director. Ross holds many insurance and investment management qualifications, including CISI, CII, LIBF and CFA. He started his career in private banking with HSBC in the UK before moving to the UAE in 2013 to focus on serving his private clients.