How professional indemnity insurance can help businesses against claims by third parties for breaches of professional duty.
Nobody’s perfect. Fortunately, that’s why there’s professional indemnity (PI) cover.
PI covers businesses against claims by third parties for breaches of professional duty. It picks up the cost if clients sue for losses owing to bad advice or poor service.
Usually, the cover is for professional negligence – mistakes by directors or staff. Sometimes it also includes other liabilities, such as defamation (libel or slander), breach of copyright or lost data, documents or client goods.
“It can be quite broad,” says David Bond, Regional Director for London Market Risks at JLT Specialty.
For many traditional professions, such as lawyers, accountants, surveyors or architects, PI cover is essential, with professional bodies or regulators insisting on cover for firms to practise.
In other cases, such as in building and construction, contracts often demand it.
Why you should consider PI insurance
But anyone giving advice, offering designs or drawing up specifications should seriously consider it, says Bond – from tax advisors to tree surgeons.
Last year, JLT had to advise art dealers to consider it to guard against lawsuits resulting from forgeries.
Even if a business owner thinks they or their staff won’t make mistakes, the costs of successfully defending a claim can easily run to six figures.
The compensation culture that’s driven the surge in personal injury claims in recent years has seen similar rises in claims for professional negligence – between 2012 and 2016, claims in the high court against solicitors and barristers alone rose 170%, according to law firm RPC.
With a competitive market, it’s a good time to buy. In any case, though, the costs pale in comparison to the potential damage, according to Bond.
“If a business is averse to paying out money unnecessarily that’s precisely why they should buy it, because it’s there to protect them and their balance,” he says. “Potentially it could save the whole business if the worst happens.”
For further information, please contact David Bond, Regional Director for London Market Risks on +44 20 7528 4449