Professional Indemnity Insurance – SME’s Exposure to Claims
In over twenty years of arranging Professional Indemnity (PI) cover for professionals, we have seen many cases where PI insurance has protected companies from facing possible financial ruin by settling the legal and compensation fees linked to claims.
PI claims are often complex and could affect a wide variety of professional service firms, from traditional entities like Engineers to ‘emerging risk’ technology companies, in both the SME and ‘Blue Chip’ sectors.
Your clients have the right to claim against your business if they believe that you or your staff have provided an inadequate service which has resulted in them experiencing a financial loss; and if your company provides professional advice, design or services you could be exposed to being sued by your client, even if it was not necessarily your fault.
Having to fund the associated legal costs with a claim, not to mention the lost revenue from taking time out to defend the allegations (regardless of whether they are true or not) can cause serious consequences for a small business. With adequate cover the liability for costs incurred to defend and/or settle claims on your behalf could be transferred to a specialist PI Insurer, to protect your business interests.
Many professionals are obliged to hold PI Insurance as part of their membership to an applicable institute and/or as part of the mandatory requirement issued by their regulatory body. These requirements are designed to protect the public interest and also professionals, who without the cover provided by PI Insurance, may be liable for thousands of pounds worth of legal and compensation fees in the event of a claim. Some professionals, such as accountants, surveyors, solicitors and ‘Independent Financial Advisors’, cannot legitimately trade without a valid and compliant PI policy. More recently, many companies now ask suppliers such as IT consultants and management consultants to sign contracts to state they have a valid PI policy in place.
Policy Protection:
A comprehensive PI policy should cover you for claims brought by a client in respect of most of the following areas and apply to the legal costs associated with defending allegations as well as the potential compensation/settlements awarded to the claimant:
- Negligence, errors and omissions arising from a breach of your professional duty in relation to the performance of your professional business activities;
- Breach of contract, as long as the conditions are no more onerous than would otherwise be implied by common law or statute. However, some suppliers currently offer full breach of contract coverage to certain classes of business;
- Dishonest, Fraudulent or Malicious acts or omissions of any former or present Employee;
- Libel & Slander;
- Breach of confidentiality;
- Unintentional infringement of Intellectual Property Rights;
- Loss or damage of documents;
- Ombudsman awards;
- Criminal proceedings arising from alleged breach of legislation, such as ‘The Data Protection Act’;
- Any other civil liability which does not form part of the exclusions of the policy;
- Defence and representation costs.
Case Study – TalkTalk
When a young 15 year old boy was arrested over the TalkTalk hack, it came to light that he was suing three national newspapers - Daily Telegraph, The Daily Mail and The Sun – for alleged breach of privacy, claiming negligence, misuse of private information, defamation, breach of confidence and data protection. Twitter and Google have also been named.
Source:
Independent News UK
The Guardian News
Complementing your PI Policy – PIA Recommends
There are many benefits to purchasing several insurances at the same time, from having the same renewal date for all your policies to discounted prices. We recommend considering these additional insurances together with your PI policy – they will be easy to select when you get your quote online:
Public Liability
Covers the costs of legal expenses to defend an allegation against your business and any damages awarded in the event a client or member of the public suffers personal injury or property damage as a result of your business activities. Important to consider for businesses that interact regularly with customers.
Employers Liability
Required by law for most employers, unless you are exempt from the Employers’ Liability (Compulsory Insurance) Act. You could be fined up to £2500 a day if you are without suitable insurance.
The following could be added as an extension of your PI policy and can be selected after you have chosen your quote online:
Legal Protection
Designed to provide assistance on a range of potential business problems, from property disputes to contractual debt recovery. In addition, a range of legally compliant templates can be downloaded and used internally; for example HR documents and a free legal assistance helpline is included.
Other Insurance to Consider
Directors & Officers Insurance
Directors and officers could be held personally liable for damage and legal costs if a claim were to be made against them for a wrongful act and without suitable cover in place, it could be leaving their personal assets at risk. Read more about D&O.
Cyber Insurance
Comprehensive Cyber products offer access to risk mitigation tools and cover for cyber-related legal costs, 3rd party compensation, notification costs, loss of income/stolen assets, investigations/fines and new systems.
Cyber claims can be extremely diverse and often include costs associated with losses from Cyber-crime, loss of income from denial of Internet access, law suits brought against you by third parties, damaged systems and subsequent reputational harm.
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