Professional Indemnity Insurance

Managing Your Duty Of  Care

A ‘Professional’ is now regarded as any person who offers specialist advice or services. As a professional, you owe a legal ‘duty of care’ to your clients. If you breach that duty of care by making a mistake in the services you provide, your client can claim compensation from you for losses and expenses caused by your negligence.

Today’s commercial environment is becoming increasingly litigious with clients seeking compensation far more frequently than in the past. Even if the allegation made against you is false, the legal costs involved in defending the claim can be very high.

Without a valid Professional Indemnity insurance policy, you will be left to defend the allegations and will have to instruct a lawyer and pay for the subsequent legal costs involved. In the majority of cases the claim will settle before going to court, but even in very minor disputes the legal costs can build up very rapidly.

Professional indemnity insurance cover to consider

Full Civil Liability cover or just Errors and Omissions Cover?

A ‘civil liability‘ wording is the widest available form of cover and wider than the usual ‘negligence’ or ‘errors and omissions‘ wordings. This wording will cover situations where you may be held liable for a loss, without having being found to be negligent.

Some basic PI policies are what we call “Negligence Only”, in other words, the insurance company will indemnify you against claims for Professional Negligence Only.

A Negligence only policy is what is known legally as a strict liability policy and will indemnify you against losses laid out in the policy wording, but in the main, the claimant will need to prove the following three points:

• You owe a duty of care to the claimant (usually your client)
• You’ve breached your duty of care
• The said breach has caused loss to the claimant

In contrast a full civil liability provides cover for all claims made against you which are not explicitly excluded.

Also, a full civil liability policy will often extend the cover to include:

• Defamation (libel and slander)
• Loss of documents or data (privacy)
• copyright infringement or intellectual property disputes

Limit of Indemnity Chosen.

This will depend on your profession, your contractual position and your own assessment of the risk that you perceive to your business. Limits available tend to range from £ 100,000 up to £ 50,000,000 or even greater. It’s important to think about potential claims and to take in to account how quickly solicitor’s fees can mount up when a solicitor is appointed to protect your position and defend you.

Retroactive Cover

It is important to understand that professional indemnity policies are written on what is called a ‘claims made’ basis. This means that they provide cover for claims made against you during the policy period (i.e. after the inception or renewal date) that relate to work that you have done at any time after the retroactive date. You must therefore ensure that the retroactive date mirrors the date from your current policy or else you will not have cover for your past work.

Any one Claim or Aggregate Cover?

In real terms if you look at your indemnity limit as a Pot of Money for any particular period of insurance then the following illustrates the difference between the cover offered:

Any One Claim- Limit of Indemnity £ 5,000,000

If you had a claim during the policy period of say £ 2,000,000 and then had another claim of

£ 3,500,000 then both claims one be dealt with in full as the cover is £ 5,000,000 Indemnity for each claim.

Any One Claim and In total basis (Aggregate) Limit of Indemnity £ 5,000,000

If you had a claim during the policy period of say £ 2,000,000 and then had another claim £ 3,500,000 then the first claim would be paid in full but the second claim would only be partially dealt with as there is not enough money left in the pot following the first claim ( There is only £ 3,000,000 left as the cover is in the aggregate during the policy period).

To discuss any aspect of your insurance requirements with us, please contact us and one of our dedicated Account Executives will be in touch to assist you further.