What is Professional Indemnity Insurance?
Professional Indemnity Insurance (sometimes called PI insurance for short), provides cover to pay for legal costs and expenses if a customer claims you have made a mistake or given incorrect advice that leads to a loss or damage to their business. It also covers any compensation you have to pay if the claim is upheld, as well as any costs involved in correcting your mistake.
What does Professional Indemnity Insurance cover?
No matter how experienced you are, or how well you and your team know your business, mistakes can happen. That is a simple fact of life. Stanmore Professional Indemnity Insurance protects you against those mistakes by providing cover in the event of:
Errors and omissions that directly impact on a customer’s business. For example, a software company may develop a bespoke online security system for a client, which later proves faulty. The company could then have to pay compensation to the customer for loss of business and cover the cost of correcting the fault.
Loss of money or goods
Many businesses look after money or store products and raw materials on behalf of their customers. So if a solicitor misplaces important documents or a courier loses an item in transit, they may find themselves facing a compensation claim in court.
Loss of documents or data
Increasingly common in the digital age, data breaches and thefts are leading to more and more cases of companies having to pay out to compensate for the loss of trade secrets and other kinds of intellectual property.
Breach of copyright and/or confidentiality
Using someone else’s intellectual property without permission, whether it is an image, a piece of music or a simple logo, can lead to a lawsuit and a large compensation payment. Professional Indemnity Insurance will help you cover the cost of a claim if you accidentally infringe copyright law.
Defamation (Libel and Slander)
A defamation claim is brought when someone believes a business has said something (slander) or written something (libel) that damages their reputation. Whether or not the defamation is deliberate, it can still lead to a large compensation claim and unwelcome negative publicity.
Why do you need Professional Indemnity cover?
Mistakes happen, no matter what sector you are in, we are all fallible. Professional Indemnity cover will protect you in case of legal cost or rectification costs. As society has become more litigious, business are finding clients are more inclined to resort to litigation if they feel that have not received the service they anticipated.
If you are in a regulated industry, Professional Indemnity might be a compulsory factor in retaining your chartered/regulated status.
Proof of Professional Indemnity can sometimes be part of your contract with a client. Having adequate Professional Indemnity in place reflects that you are a conscientious business and keen to do a good job.
Example Professional Indemnity Claims
- You’re a graphic designer and you use legally protected intellectual property, such as stock photography, without permission
- You accidentally leave your work laptop on a train. The files stored on your laptop contain sensitive client data on it, like names, addresses
- You’re a building contractor and you designed and installed the heating and ventilation for a restaurant. Post completion, the system failed to work properly. The restaurant had to close pending repairs
Your account handler
Professional Indemnity cover is an important part of your insurance arsenal. Without it you are exposed to many potential risks. Professional Indemnity is there if you make a mistake, so don’t make the mistake of not have suitable cover in place – Lyndsey Chadwick
Who needs Professional Indemnity Insurance?
Whatever industry you are in, having a Professional Indemnity Insurance policy that covers you against legal costs and compensation offers enormous peace of mind. It also allows you to concentrate on your core task of planning, running and growing your business while a case is heard. In some cases, it could even stop your business going into liquidation in the face of a claim it couldn’t otherwise possibly meet.
The types of business that have traditionally needed PI Insurance include Professional Consultants, Technology Service Providers, Solicitors, Design Engineers, Recruitment Professionals and Private Tutors.
As the knowledge economy continues to grow, however, the emergence of independent businesses offering critical skills and advice in highly specialist markets has made Professional Indemnity Cover even more of a priority.
In short, Professional Indemnity Cover can help reduce risk and exposure, while providing all-important financial stability for businesses that provide a service of almost every kind.
How much Professional Indemnity Insurance Cover do I need?
PI Insurance is often arranged on a contract by contract basis, especially where larger, long-term projects are involved. In these cases, there is often a minimum specified amount that the client requires a supplier to be covered for in the contract.
If you operate in an industry where professional liability cover is a legal requirement, there will usually be a minimum level of cover set out by the regulator or professional body that you can use to gauge your ongoing PI Insurance needs.
In either case, our team will work with you to arrive at a level of cover based on a comprehensive assessment of the likely risk and the value of any losses resulting from negligence on your part.
Is Professional Indemnity Insurance mandatory?
Many professions, such as engineering, accountancy and surveying, make PI Insurance a compulsory requirement for businesses before they’re allowed to practice.
Individuals working on a freelance or contract basis may not need cover as a legal requirement, but could find they struggle to be awarded contracts without it.
Even if you do not have to have PI Insurance to carry out your business, doing without it still exposes you to the risk of having to pay thousands of pounds in compensation and legal fees to defend a claim.
So rather than “Do I need Professional Indemnity Insurance?”, perhaps the question should really be “Can I afford to do without it?”
Talk to Stanmore the insurance people about Professional Indemnity Insurance Cover now – call our team on 01204 570 370