We all make mistakes, after all, to err is human. However, not all humans are forgiving, especially when it comes to their money. If a business service provider cause severe financial loss or damage to property or any other harm to a client due to an error of judgement, incorrect or inadequate service or advice, then the client can seek compensation from that service provider. This is where Professional Indemnity insurance comes to your rescue.
Professional Indemnity insurance also known as Professional Liability Insurance is intended to protect professionals and their businesses in the event of claims made by a client (or third party) suggesting that they have suffered loss as a result of non-performance, breach of contract or professional negligence in the services rendered.
It is important to feel confident in the quality of work done. But with the best intentions, accidental errors and disputes over quality can happen. If they do, professional indemnity insurance can help to protect the insured if claims are made against that insured by a client. Also, it helps to put mistakes right and cover any legal costs.
Who needs Professional Indemnity Insurance
Professional Indemnity Insurance provides cover for legal costs and expenses incurred in the insured’s defence, as well as any damages or costs that may be awarded, if the insured is alleged to have provided inadequate advice, services or designs that cause his or her client to lose money. However, Professional Indemnity Insurance is design to provide cover to professions who give advice or provide a service as part of their business.
Professional Indemnity Insurance is mandatory for members of some professional bodies and is required by some regulators. This includes solicitors, financial advisers, accountants, architects, IT consultants, business consultants, surveyors, engineers, media practitioners and some healthcare professionals.
Why Professional Indemnity Insurance
If individuals or organisations are in the business of charging clients for advice, then professional indemnity insurance is important for them. This is because it delivers important financial protection for a variety of professional advisers and consultants. In the event that a client suffers a financial loss as a result of supposed negligence, mistake, omission, misrepresentation, inaccurate advice, violation of fair dealing and good faith, professional indemnity insurance will meet the cost of defending claims and any damages payable.
For instance, poor installation of security systems resulting into a client’s system failure, causing the client a great financial loss. The service provider could be sued. A lawsuit often involves considerable expense. If the service provider don’t have professional liability insurance, that individual or the organisation will have to pay for the costs out of their own purse. If, however, the individual or the organisation has professional indemnity insurance, the costs are covered up to the policy’s limits.
A professional is regarded as any person or their firm offering specialist advice or services. The risks are as significant as ever and mistakes can still lose a professional their business and their reputation without adequate professional indemnity insurance.
Depending on the policy purchased it will cover negligence, errors and omissions, breach of duty and civil liability. Professional Indemnity Insurance also cover the liabilities which are the result of negligence, such as business interruption and the significant legal cost incurred from being sued.
Some policies will also offer protection for business or financial loss caused by defamation, loss of paperwork, the dishonest conduct of employees and unintentional breach of confidence.
The amount an insurance can pay out will depend on the level of cover purchased. An individual professional or an organisation can increase the sum insured deemed adequate by paying an additional premium for the cover. The compensation payment will usually take into account the financial loss that the client has suffered. So if an entire building needs to be rebuilt because of someone’s negligence, the pay-out will be a lot higher than for something smaller.
When you run your own business, the responsibility for getting things right sits firmly on your shoulders. While it may seem like a lot to consider, particularly if your business has never faced a claim situation before, it makes sense to get the right level of protection should the worst happen. This will ensure that you have the appropriate legal support and the financial means to get your business back on track as quickly as possible.
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The author is with the Tri-Star Insurance Services Gh. Ltd.