By Professional Insurance Agents Limited
Professional Indemnity Insurance is compulsory for most professional businesses and services, these include traditional professions such as architects, engineers, brokers, solicitors, independent financial advisers, accountants, computer consultants, and new insurance covers for miscellaneous classes where professional indemnity insurance protects that business’s interests against claims for error, omissions, professional neglect for both the principles and their employees.
Without professional indemnity insurance companies expose themselves and run the risk of being sued for all sorts of claims.
A professional indemnity insurance policy may cover you for areas such as libel and slander, professional neglect, malicious falsehood, passing off copyrights, breach of confidentiality, and negligent statement or actions.
Professional Indemnity Insurance provides essential financial protection for a wide range of professional advisers. In the event that a client suffers financial loss as a result of alleged neglect, error or omission professional indemnity insurance will meet the cost of defending claims and any damages payable.
Any person who gives advice, designs, or offers similar services in a professional capacity is seen by clients as an expert. In these times of high consumer awareness, clients will not hesitate to pursue a claim if they feel that they have received sub-standard service. The need for professional indemnity insurance has never been greater.
While some professional people see professional indemnity insurance as an expensive and unnecessary overhead, we know from experience that any professional can produce substantial claims. Court awards have risen sharply in recent years. Without insurance, the financial security of a business is threatened. The following examples highlight the importance of professional indemnity insurance:
- A business wished to be known by a particular trade name. After consulting with company registration agents, it was told that there was no objection to its chosen name. Proceedings were issued by a company with a similar name and £20,000 was paid in connection by the agents.
- Detailers prepared structural drawings for the erection of steelwork. It was subsequently alleged that the drawings contained errors and £110,000 was claimed for the costs of alteration and the resulting delays in construction.
- An auctioneer sold property at auction over a number of years. It was alleged that the property was stolen and a claim for £250,000 was brought for conversion.
- It was alleged that consulting engineers were negligent in their design of waste heating boilers. A claim for £4m was brought for the cost of extra work and the resulting delays.
- An estate agent missed the opportunity to carry out a rent review because of a defective rent review notice. The claim was settled for £50,000.
How much cover is required?
Only the professional can assess the amount of cover appropriate to the business. In determining how much cover to effect, it is important that a realistic view is taken of the potential damages and legal costs for which the business could become liable. Being under-insured can be almost as financially disastrous as being without insurance at all – as the examples below reveal.
We recommend that no insurance policy is taken out with a limit of less than £250,000. We will, however, provide a quotation for lower levels of indemnity if asked to do so. We are also able to provide cover up to a limit of £10,000,000 in most cases. Any professionals in doubt about the amount of cover they should take out should consult their legal advisers.
The following examples highlight the dangers of being under-insured.
Case 1
It was alleged that surveyors were negligent in their valuation of a property on behalf of a lender.
Loss: £1.5m
Insurance: £1m
Case 2
A consulting engineer designed a roof which proved to be defective.
Loss: £350,000
Insurance: £100,000
Case 3
A design consultant provided designs for tools to be used in manufacturing process. It was alleged that the designers were inaccurate.
Loss: £150,000
Insurance: £100,000
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