Does your business offer professional advice or services? Do you have Professional Indemnity Insurance?
In this blog we explain why your business needs Professional Indemnity Insurance and the definitions of the terms and coverage in most Professional Indemnity insurance covers.
What is a Professional Indemnity Insurance cover?
A Professional Indemnity policy protects businesses that provide professional advice from claims by third parties for damages arising from unintentional acts, mistakes, error, omissions or breaches of professional duty in the course of business.
Professional Indemnity Protection is includes but is not limited to: financial loss, property damage, and personal injury.
What this means is if your client experiences financial loss, property damage or personal injury as a result of an mistake, error, omission or breach that occurs in the course of your business, your Professional Indemnity Insurance will protect your business from crippling legal costs and a damaged reputation.
What terms and coverage is in a Professional Indemnity Insurance cover?
A ‘Claims Made and Notified’ policy requires any fact, situation or circumstance that may result in a claim, to be notified to the Insurer within the period of insurance. Generally the mistake that resulted in the damages must occur within the period of Insurance.
Prior Claims or Known Circumstances
There are some Professional Indemnity covers with retroactive coverage which will the allow mistakes to occur at anytime before the period of Insurance.
However, most Professional Indemnity are Claims made policies and therefore will exclude claims arising from acts and circumstances known to the insured before the policy period. Some unknown or unforeseen circumstances and events that occur before the period of Insurance are considered under a ‘Claims Made and Notified’ policy.
Most Professional Indemnity Insurances cover for loss of a third party’s documents by the Insured where the Insured has physical custody and control of the documents. The loss documents policy will usually cover the costs to replace or restore the lost documents.
It is important to note that the cover is never intended to cover the Insured’s owned documents and will only be possible if a third party has suffered a loss.
Libel and Slander (Defamation)
Libel and Slander are defamatory statements made to a third party that could potentially effect their reputation. If the statement is made orally it is considered slander, and if the statement were made in written form it would be considered libel.
A Professional Indemnity Insurance policy can usually be extended to include cover for unintentional acts of libel and slander.
Depending on the Insured’s business activities, territorial limits may arise for where an act, error or omission that results damages may occur. The territorial limit may be just for Australia and New Zealand but in some cases there may be a worldwide limit.
Jurisdictional limits also exist on Professional Indemnity Insurance covers where the policy will respond to claims being made against the insured in selected countries.
For more information on Professional Indemnity Insurance or any Insurance policy questions please contact Nepean Brokers at 03 5982 2330.