Professional Indemnity Insurance Explained

What types of businesses require Professional Indemnity insurance?

Professional Indemnity insurance is designed to protect businesses that provide advice, professional services or consulting. This may include architects, engineers, consultants, lawyers, accountants, and healthcare providers. These professions face unique risks as mistakes, omissions or errors in their advice or service could potentially lead to significant financial loss for their clients.

What does Professional Indemnity insurance cover?

Professional Indemnity insurance can offer protection against certain types of risks, such as:

• Misleading or negligent advice
• Professional duty breaches
• Breaches involving confidential or sensitive information
• Accusations of defamation, libel or slander
• Misplacement or destruction of client documents
• Intellectual property rights violations
• Legal fees awarded against you
• Costs associated with legal defense or claims response
• Expenses related to the investigation of a claim
• Costs associated with disciplinary proceedings

In some policies, Professional Indemnity coverage may also include public relations expenses to manage your business reputation.

For business owners in the allied health sector, Professional Indemnity may extend to claims of bodily injury or illness that are directly related to the professional services provided.

3 examples of Professional Indemnity claims

Here are three examples of some common indemnity claims you might face if and when an unexpected event happens in your normal course of work:

Not doing it by the book:

A bookkeeper installed new accounting software for which the bookkeeper had no experience using. This resulted in a number errors and omissions which had a financial impact on one of the bookkeeper’s customers. They claimed $25,950 in damages and the claim was paid in full by the insurer.

Messy migration:

A migration agent mistakenly lodged an incorrect visa application on behalf of a client. In order for the client to remain in Australia, they had to submit a different visa and the client had to leave the country briefly to activate this new visa. The claim of nearly $10,000 was paid to cover the cost of the new visa and flights for the client, less the retainer fee.

Erroneous advice:

A quantity surveyor attended an onsite meeting and misunderstood the verbal description and specifications of the building project. When looking at the drawings, he had a pre-conceived notion of what was to be plastered and what was not. When the time came to pay, the estimate was out by many thousands of dollars. The Project Manager looked to the quantity surveyor who had made the error and asked him to pay for the variation of cost. The surveyor’s insurer recognised his liability and made a quick settlement offer.