Professional Indemnity Insurance At A Glance
What Is Professional Indemnity Insurance?
Anyone can make a mistake - but if your business is found liable for negligence, the costs can be financially devastating. Not only can it lead to an expensive lawsuit, but your business' hard-earned reputation may be damaged as a result.
That's why professional indemnity insurance matters - help protecting your assets and bran if your advice of services cause a client to take legal action against you.
"if you own a business, you can be liable for damages or injuries to another person or property ... consider [professional indemnity insurance] for your business if the likelihood of legal action is high."
Australian Government, Business.gov.au
Who Should Consider It?
Professional indemnity insurance is mandatory in some industries, such as medicine, accounting, law and financial advisers - with the requirements differing from state to state.
But even in cases where it's not required by law, it's recommended for anyone who is providing professinal services or advice in exchange for a fee - like, graphic designers, IT consultants and more. And regardless of your legal obligation, it's often a customer requirement that you have this cover in place.
Financial Services Guide
Did You Know?
In 2014 alone, professional indemnity and public and product liability claims increased 27.7%
(Insurancenews.com.au "Claims up, premium down for PI and PL", 2015)
$1,362 million of gross premium during the 2016 underwriting year.
(APRA, National Claims Policy Database, 2017)
701,000 PI risks written in the 2016 underwriting year
(APRA, National Claims Policy Database, 2017)
What Can It Cover?
As a wide-ranging insurance solution, professional indemnity cover may include anything from accidents to errors and omissions.
Depending on your policy, professional indemnity insurance can cover:
Civil liability to a third party arising out of the conduct of their professional business
The cost of defending an inquiry by a regulatory body into the professional conduct of the insured
The costs involved in defending a claim triggered by the policy
Direct financial loss of the business caused by the dishonest or fraudulent conduct of an employee which is first discovered during the period of insurance
Additional costs and expenses incurred during a claim
What Usually Isn't Covered?
Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer. Policies generally won't include cover for:
- Contractual or Commercial Liabilities
- Liability which results from Fraud and Dishonesty
- Pollution
- Depending on your occupation, Third Party Bodily Injury/Property Damage
- Unpaid fees
Important Note
This information is provided to assist you in understanding the terms, implications and common considerations in professional indemnity insuranc. It does not constitute advice, and is not complete, so please discuss the full details with your Steadfast insurance broker.
Case Study
Michael is an engineer who designs the supporting foundations of a residential property. He makes an error with the site calculations - which leads to the slab cracking and a damage to the property of the owner. His company is liable for this loss, which could be anywhere between $150,000 upto the full value of the house.
But because Michael has professional indemnity insurance, he's covered for this amount - as well as any legal expenses if the matter goes to court.
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