What is it ?
Professional Indemnity Insurance (P I Cover) is a form of liability insurance that provides cover for the financial consequences of professional negligence, following a breach of professional duty by way of neglect, error or omission.
In addition, an indemnity is provided in respect of the legal and other costs and expenses incurred in the defence of any claim. The general philosophy in the litigious world that we now live in tends to be 'if something goes wrong, somebody must be to blame, and that somebody has to pay'.
A professional cannot ignore an allegation of professional negligence. The allegation must be defended or admitted, and as a result, there will be cost implications in either case. Professional Indemnity insurance provides the ultimate safety net when all else fails.
Who needs it ?
Any professional person providing advice, design, specifications, supervision on a professional basis and who owes a duty of care to their client, and/or third parties.
The duty of care owed is generally the exercise of 'reasonable skill and care', in the discharge of the services provided. If a professional fails to exercise this duty (i.e. is negligent) they may be liable for losses incurred by their client, and/or third parties. Taking into account the operation of the current legal system, even proving innocence can be very costly.
Protection for professionals
A professional purchases P I Cover for their own protection. Rentguard offers specialised cover for Letting Agents, Insurance Brokers and Independent Financial Advisors. In many cases, it is a legal requirement for a business to have P I Cover and a stipulation for companies authorised and regulated by the Financial Services Authority.
What can professionals be liable for?
A claim can be lodged against the professional at any time by someone claiming that they have been negligent in their working or business practice.
This can occur when there is an agreement of ‘duty of care’, and the claimant can prove that the professional has breached that duty.
It also often occurs when a plaintiff has suffered financial loss as a direct result of that breach
If an allegation of negligence is upheld the professional is likely to be liable for the losses incurred by the plaintiff which arise as a reasonably foreseeable consequence of the professional's actions.
The professional will often be responsible for the plaintiff's legal costs and these can be substantial.
It is often the case that large sums of money are spent simply trying to recover fairly minor losses.
What is the extent of cover ?
All claims and the consequences of claims for professional negligence including the following:
What is UNIQUE about it?
Professional Indemnity insurance operates on what is known as a 'claims made' basis. This means that it is the policy in force at the time the claim is notified which will operate, irrespective of when the work was actually undertaken or when the alleged act of negligence took place.
The ability of clients or third parties to bring claims many years after services are complete (subject to the relevant limitation periods) emphasises the importance of maintaining cover into the future.
Limits of Indemnity
The limit of indemnity is the maximum amount that can be claimed from insurers for the professional's liability to pay claimant damages. Costs incurred to defend the position are usually paid in addition to the limit of indemnity.
It is important to note that disclosing the limit of indemnity to a client does not lead to a limitation of liability, which can only be achieved by negotiating a specific financial cap as part of the professional's appointment.
The limit of indemnity operates in one of two ways:
Each and every claim cover - this means that the indemnity limit applies separately to each claim that is made under the policy. However, all claims arising from the same occurrence would be regarded by insurers as one claim.
Aggregate cover - the limit of indemnity would apply as one single amount for all claims made in each period of insurance.
If you are looking for a competitive quote on professional indemnity insurance, why not give us a call on 0208 587 1060 and we will do our best to provide you with a suitable policy at extremely competitive rates.