Professional Indemnity Insurance can be a complex subject, and there are a few common misconceptions that arise as a result. Within this blog post, we will explain the most common misconceptions surrounding professional indemnity insurance, which should hopefully provide you with a better understanding of this type of insurance policy.
“I have not charged for my advice therefore I cannot be claimed against”
It is often assumed that professional indemnity insurance is only suitable for professionals who charge for their advice. For example, if you are a designer and as part of a quote you produce a preliminary design, you may expect that you cannot be claimed against. Anybody providing a professional service has a responsibility to provide their client with the best advice possible from their position of expertise. If this advice, even if it was given freely, causes the client a loss, you may find yourself defending a claim for negligence.
“My client can’t claim any higher than the fees that I have charged”
If a client loses money, they can not only claim for the fee they paid you, but for any additional or related losses they have incurred as a result of your professional services. It is common that these losses are often greater than the cost of your contract.
“I am only liable for the amount for the disclaimer that I have that limits my liability”
Some liabilities cannot be excluded or limited, and wordings can be challenged in court and ‘onerous or unusual’ terms can be ignored in some cases.
“If my client has an indemnity policy, I am protected through that”
Your client’s policy will protect themselves for the results of your services or advice, but you may still be exposed to claims if they incur a loss as a result of your services. This is unless you are explicitly named on their policy as being covered or if there are specific policy terms and conditions that would provide cover for your activities.
Furthermore, as a subcontractor your work may contribute to the output of a larger company. It is important to bear in mind that, if that company suffers a loss as a result of your actions, their insurance company is within its rights to claim against you for your part in that loss.
“My work is always checked and signed off so I don’t need an indemnity policy”
Even where your work is checked and signed off by a qualified employee, your business can be claimed against for negligence or breach of a duty of care if it results in a loss. If you are an employee of a business, then you should be protected by them, however a subcontracting limited company or sole trader providing advice for their clients would still be deemed responsible for their services.
“I only need a policy in place whilst my contract is running”
Unlike most other policies, professional indemnity is known as a ‘claims made’, which means that even several months or years after you have provided a service, you can be claimed against. If you have cancelled your policy when a claim is made, you will not be covered. Professional indemnity needs to be maintained after your services have been provided, and this is often even a condition of some contracts. Professional indemnity ‘run-off’ cover should be arranged in these circumstances.
“I don’t need a Professional indemnity policy as the claim will never hold up in court”
Even where it seems clear that a loss is not your fault, the legal costs of defending a claim can quickly mount up. One of the advantages of a professional indemnity policy is that your policy is in full force from the moment your client expresses their intent to claim.
“Professional Indemnity only covers financial loss”
Modern professional indemnity policies now include a range of extra features. These include defence from claims that you have breached someone’s intellectual property, misrepresented your client, damaged their reputation, or even acted dishonestly. Different industries face different risks so it is always worth looking over a quotation to see all of the different cases which a policy can cover.
We always recommend that you seek legal advice regarding the extent of your legal liability to clients. This article is a guide only and is not to be construed as providing legal advice. To find out more information about professional indemnity insurance, please contact a member of our team. Whether you think you may need a professional indemnity insurance quote or just simply need additional support in understanding how it can protect you, we are more than happy to help.