Professional Indemnity Insurance

Professional indemnity insurance coverage can vary between policies, but some of the typical inclusions include:

• Negligence – if you make a mistake when delivering your services or advice
• Breach of duty – if you don’t stick to the obligations set out in your contract
• Legal costs – if you need to hire a lawyer and pay court costs when defending yourself against the claim
• Damages – if you have to pay compensation to the client
• Defamation – if something you write or say leads to a libel or slander claim
• Public relations expenses – if you end up with a PR nightmare on your hands
• Loss of documents – if you lose or damage a client’s important data or documents and have to cover the cost of recovery and compensation

The amount of coverage varies between policies and providers, but you can typically choose limits ranging from $250,000 to $10 million. There may be ‘sub-limits’ applied to each specific claim type, though, which basically means there’s a cap on how much you can claim for certain losses – even if your overall coverage limit is higher.

Put simply, professional indemnity insurance can provide an incredibly valuable financial safety net. If you faced a professional indemnity claim that involved legal disputes and demands for compensation, and ended up in court, you’d be up against some pretty hefty costs.

Rather than forking out thousands for legal fees, court expenses and payouts – and putting your business at risk – professional indemnity insurance could help cover those costs. It gives you peace of mind knowing you may not have to shoulder the full financial burden if anything were to go wrong.

Professional Indemnity claims can be substantial, simply because of the high level of trust clients place in certain service providers, as well as the impact that bad professional advice or services can have on those clients.

Without professional indemnity insurance, your business could be facing 100% of the costs of a claim, potentially meaning insolvency.

Professional indemnity insurance isn’t necessary for all occupations, but it is for some. These include, but aren’t limited to:

• Accountants who are members of Certified Practising Accountants (CPA) Australia or the Institute of Chartered Accountants Australia (ICAA)
• Tax agents
• Doctors and dentists
• Nurses and midwives
• Architects and draftsmen
• Registered migration agents
• Lawyers in some states, including NSW and Victoria

Even if it’s not mandatory for your business, professional indemnity insurance could still be a very good idea for any business that delivers advice or services to clients and is at risk of making a mistake.

So, what happens if someone files a professional indemnity suit against you? The steps can differ between insurance providers, but generally you’ll need to do the following:

• Notify your insurer as soon as possible. Your first step is to get in touch with your insurance provider immediately to let them know about the claim. Do this whether it’s an actual claim or a potential one – in other words, one that may arise after an incident.
• Submit a claim form. This will include details on the incident, when you performed the work and your response to the claim. You’ll also have to provide supporting documents such as contracts, written communications between you and the claimant, court proceedings, and any other relevant evidence.
• Wait for your claim to be assessed. Once all your documents have been submitted, your insurer will assess your claim and let you know the outcome. If it’s successful, you’ll have some or all of your costs covered.

The excess is the gap you have to pay if you make a claim. It’s not uncommon for some professional indemnity policies to come with a $0 excess (i.e. no out-of-pocket expenses) but the amount can vary depending on the policy.

While professional indemnity insurance can cover a lot of risks, it won’t cover everything. Common exclusions include:

• Bodily injury, illness or property damage to your client (this falls under public liability insurance)
• Deliberate acts
• Fraud and dishonesty
• Claims arising from known facts (things you were already aware of) or incidents that happened before your policy started
• Intellectual property infringement, such as copyright, plagiarism or confidentiality
• Injuries or illnesses to your employees (these are covered by workers’ compensation)

There may be other exclusions in your policy. Your best bet is to go through your policy’s product disclosure statement (PDS) to find out the specifics – that way, you won’t be caught out by any unexpected (and costly) gaps if you need to make a claim.

Professional indemnity and public liability insurance do have some crossover. Both could help protect your business from third-party claims that come about through your business activities.

The main difference is that professional indemnity insurance can cover you if your advice or services lead to financial loss for your client, while public liability insurance provides a financial safety net if a third party is injured or their property is damaged and your business is responsible.

Leave the hard work to us – iSelect and BizCover take the pain out of finding business insurance. Using our comparison tool, you can easily weigh up professional indemnity policies from a range of insurers. Get started online today.