Professional Indemnity Insurance
Professional indemnity insurance provides you with coverage for financial penalties caused by negligence in your job, whether caused by accident, oversight, or by purposeful or inadvertent neglect. It also provides protection surrounding legal expenses as well as other costs that you might accumulate while defending yourself from a claim made against you. This is particularly important in the highly litigious society that we live in right now. You cannot simply disregard accusations of negligence in your job – especially not today. If someone feels that you are to blame for a problem that they experience, you could very well be sued and go to court. When an accusation is made, you have to either acknowledge it or defend yourself against it. Either way, you will inevitably end up having to pay. This is where professional indemnity insurance comes in. A professional indemnity insurance policy will provide you with a cushion just in case a problem surfaces.
Who Should Have Professional Indemnity Coverage
Anyone who has a duty of care responsibility to their clients and third parties in the public should have professional indemnity insurance. This includes those who offer guidance and advice, administration, or specifications. Whether you provide these services at a cost or pro bono, you should be covered. ‘Reasonable skill and care’ is the typical expectation when it comes to duty of care, and the way the UK legal system works currently, something as simple as proving your innocence can be a great expense. Having a policy in place to cover and help you with this can take a lot of worry off your shoulders.
A Policy Meant to Protect Your Interests
Professional indemnity insurance is bought to protect oneself and their business from the financial burdens of blame. It is not a policy made to benefit your customers, though it can sometimes incorrectly be viewed in that way. Your customers cannot file a claim against your insurance coverage. Before they receive any remuneration for damages or other problems, they have to prove that you are liable for those situations.
How is Liability Applied
Liability can be applied to the members of a business whether that business is owned by a single person or by a partnership of two or more people. In a partnership, liability can be a joint responsibility, applied equally to the partners. Even if the business is dissolved, you can still be held liable until the limitation periods provided for in contracts run out. In a limited company, liability comes to an end when the company is no longer a legal entity – however, each director in that company continues to be held liable for his or her own works. This means that the directors can have liability suits filed against them even when the limited company is gone.
How Professionals can be Held Liable
Before you can be held liable, the claimant has to prove that you were negligent in ways such as failing to provide skilful work or showing carelessness in the fulfilment of your services. If the accusations brought against you are supported, then you could be held liable for any losses that the claimant had as a result. The amount that you are responsible for paying – including both the amount you are being sued for and the claimant’s legal expenses – can be quite significant. Keep in mind that you can sometimes pay exorbitant amounts while trying to defend against suits for minor losses. It is up to you and your solicitor to decide whether the amount of money in question is worth fighting over.
How Much Coverage is Involved
Professional indemnity insurance typically offers limited coverage for awards to claimants in suits involving professional negligence. Unless you have placed limits in the contract you hold with a client, your liability could very well be unlimited and last for a great stretch of time. Professional indemnity insurance, however, has limits. There will be a limit on how much the insurance company will pay, a limit on the amount of time they will pay within, and some of the company’s own terms and conditions surrounding your coverage on top of this. It is important to know these limits before you purchase the policy, so you can compare the offerings of different insurance companies or brokers. You should be looking at the coverage amounts from your first quote forward, ensuring that you have enough for the size and function of your business.
How Professional Indemnity Insurance Operates
This type of coverage operates on a claims made basis. It is essential to stay covered, no matter how long ago work was done and whether your business has dissolved or is still going strong. Customers and members of the public have the opportunity to file claims against you for many years after your work was finished, as long as they are within the time of limitation that has been set.
The maximum amount of money that can be obtained by a claimant from a professional indemnity insurance company is referred to as the ‘limit of indemnity’. Costs associated with defence are typically offered on top of this amount. The limitation of liability is set at the outset of the policy and capped at that time – allowing a customer or client to know the amount of your limit of indemnity does not affect it. Your limit of indemnity functions in two ways – aggregate cover and each and every claim cover. In aggregate cover, your limit of indemnity applies to all claims that are filed during each period. This means that the single limit will be used to pay for any claims within that time. Each and every claim cover provides a limit for each claim that is filed on the policy. This means that the amount resets with each new claim and you are in less danger of running out of coverage with your professional indemnity insurance if you have multiple claims per insurance period.