Professional indemnity insurance is an important component of risk protection for businesses that provide services or expert advice. It provides an “errors & omissions” cover in the event that you or your staff are accused of negligence or professional misconduct in the delivery of services that you provide, or the advice that you impart to your clients.
What Professional Indemnity insurance covers
Having professional indemnity insurance means that you could be covered for the costs of defending a claim made against your business, in addition to insured costs of any claim for compensation that you may be found legally liable to pay.
Considering the length of time that it can take for an investigation to be conducted and a legal claim to be made, this can prove critically important as defence costs can quickly escalate. For small consultancy firms, the financial costs of defending a professional error or omission could be devastating.
It’s important to understand exactly what your cover will include or exclude, as each insurer will have their own type of policy that’s tailored to different professions. These may include protection against claims of fraud and dishonesty, misleading or deceptive conduct, costs for you to attend court hearings, accusations of infringement of intellectual property rights etc.
In some circumstances, insurers will provide ‘retroactive cover’ for past work covered under an existing policy. This is determined by what is termed a ‘retroactive date’ and is the start date for which your professional services will be covered. The ‘retroactive date’ needs to be explicitly noted on your policy and you will need to provide written proof of your previous concurrent insurance covers back to the retroactive date and no claims have occurred to your knowledge.
It’s recommended that you discuss this with an NZbrokers Member if you need cover for previous work that you’ve undertaken, as a claim could be made against you for work that you did weeks, months or even years prior to taking out your professional indemnity insurance cover. Insurers will usually agree to the ‘retroactive date’ however it does need to be discussed and noted on your policy schedule to ensure you have the right cover in place.
Who need Professional Indemnity insurance and why?
There are many different types of businesses that should consider professional indemnity insurance including, for example, lawyers, architects, engineers, accountants, independent or management consultants, travel agents, recruitment agencies and construction consultants.
Any business that provides professional or specific advice or services to clients, usually charged for on a separate fee basis, could be at risk of allegations of misconduct or failing in their duty of care, hence why it’s so important to have the right insurance cover.
For example, if a client relies on advice from your business and suffers a financial loss as a result of errors that you or one of your staff have made, then you may be found liable for damages.
Unforeseen events can and do happen and the associated risk exposure can be significant. Ideally every consultancy or business that offers services or advice to clients should have professional indemnity insurance.
Why having an insurance broker is so important
Some service contracts will require that you have a certain level of professional indemnity cover in place as part of the contractual agreement between your business and your client(s). However, different industries will have different levels and types of exposures so it’s always important to talk to an experienced broker if you are unsure.
The level of risk and the type of services you provide will define the policy wording and the associated annual premiums. An NZbrokers Member will be able to advise what level of cover you need so that you don’t end up paying more than you need to, or visa versa.
As professional indemnity insurance is a specialist type of cover, and can be confusing for many businesses to understand, an NZbrokers Member will be able to source a tailored policy from the many insurers that they deal with that is best suited for you and the type of service you provide.
Contact an NZbrokers Member to discuss your Professional Indemnity insurance requirements.