Professional Indemnity
Professional Indemnity Insurance – Why is it important?
Anyone who gives to another person advice and/or services of a skillful character according to an established discipline might be regarded as a ‘professional’.The law requires a professional to exercise their skill at an appropriate level expected of that profession. But professionals are only human and mistakes do happen. Any financial loss arising from a mistake or failure by that professional to do so, may result in an award in favour of a third party. A professional may also be held to be liable for a mistake even though there was no negligence (i.e. breach of the Trade Practices Act).
Generally a professional who is employed is covered by the employer's PI cover but appropriate and adequate PI insurance is essential for those undertaking any consulting or contracting work for which they are liable.
A Professional Indemnity policy is designed to protect the personal assets of a professional against damages awarded against them by a court, or resulting from an approved negotiated settlement, in relation to an act, error or omission committed by the professional during the conduct of their professional business activities. It also covers the costs and expenses of defending claims.
In today’s litigious society, no professional can therefore ignore the real possibility that a claim may be brought against them by a disgruntled client during the course of their career. A Professional Indemnity policy offers peace of mind, allowing the professional to carry on with their normal business activities.
Why is it important for Architects
Why is it important for ICT Professionals
Why do you need PI insurance?
You may feel that because your work is supervised by others, you do not need PI Insurance, but please consider this:
- Defending a claim of "negligence" usually involves seeking specialist legal advice and costs can very quickly mount up. You could expect to pay, for your own legal costs alone, $15,000 per day should the claim end up in Court. On this basis, the cost of defending a claim can very easily become a financial nightmare for the uninsured professional person.
- Contract Engineers have been held to be negligent even though their work was supervised by the principal by whom they were "employed". In some of those instances the principals own PI Insurance did not protect the Contract Engineers.
- Many government bodies, local authorities and private consulting firms now insist that the professional contractors and consultants with whom they deal carry PI Insurance.
- Everything a professional person does and says in the course of their business could result in a professional liability claim. In the present climate, spurious claims of negligent advice are being made with the aim of delaying the payment of professional fees. You might know that the claim is spurious, but you still may need to defend it. Remember, Civil Courts operate on the balance of probability principle, rather than the level of proof required in Criminal Courts.
Frequently Asked Questions on PI insurance
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How to apply
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