In this blog post, we will look into the full explanation from our mini misconceptions about PI Insurance. Here we hope you will find all the additional explanations and information you require to understand Professional Indemnity Insurance further.
“If I don’t charge for my advice, I can’t be claimed against“
People often expect that Professional Indemnity is only suitable for professionals who charge for their advice. If you’re doing a preliminary design as part of a quote or writing a report ‘on spec’, you may expect that you can’t be claimed against. Anyone providing a professional service a duty of care to their clients; a responsibility to provide them the best advice possible from their position of expertise. If this advice causes your clients a loss, even if it was given freely, you could find yourself defending a claim for negligence.
“The most my client could ever claim for is my fees“
Unfortunately if a client loses money because of your services, they can not only claim for the fee they paid you, but for any additional or related losses they have incurred as a result. These losses incurred as a consequence of your professional services can often be greater than the value of your contract, so it’s always worth asking yourself what if..?
“I have a disclaimer that limits my liability, so I’m only going to be liable for that amount“
This is not nearly as black and white as it appears; some liabilities can’t be excluded or limited, wordings can be challenged in court and ‘onerous or unusual’ terms can be ignored in some cases. Professional Indemnity can provide another layer of protection. Including a legal advice service, PI Insurance can help you to understand exactly how a disclaimer may or may not protect you.
“I am protected through my clients’ indemnity policies“
Actually your client’s policy will protect themselves for the results of your services or advice, but you may still be exposed to a claim if they incur a loss as a result of your services. This is unless you are explicitly named on their policy as being covered. As a subcontractor your work may contribute to the output of a larger company. However, if that company suffers a loss as a result of your actions, their insurance company is within its rights to claim against you for your part in that loss.
“I don’t need Indemnity cover because my work is checked and signed off“
Even where your work is checked and signed off by a qualified employee, your business can be claimed against for negligence or breach of a duty of care if it results in a loss. Employees are protected by the business which employs them, but a subcontracting limited company or sole trader producing reports, designs or other advice for their clients are still deemed responsible for their services. They can be claimed against long after the initial work has been completed and signed off, and even when the contract has ended.
“I only need to hold a policy whilst my contract is running“
Unlike most other policies, Professional Indemnity is known as ‘Claims made’, this means that even several months or years after you have provided a service, you can be claimed against. If you have cancelled your policy when a claim is made, you will NOT be covered. Professional Indemnity needs to be maintained after your services have been provided, and this is often even a condition of some contracts.
“It will never hold up in court, so there’s no need for a Professional Indemnity policy“
Even where it seems clear that a loss isn’t your fault, the legal costs of defending a claim can quickly mount up and bring a business to its knees. One of the advantages of a Professional Indemnity policy is that your policy will respond from the moment your client expresses their intent to claim, providing guidance from experienced professionals and specialist claims solicitors and saving what can become significant expenditures.
“Professional Indemnity only covers financial loss“
Modern Professional Indemnity policies now include a range of extra features. These include; defence from claims that you have breached someone’s intellectual property, misrepresented your client, damaged their reputation, or even acted dishonestly. Different industries face different risks so it’s always worth looking over a quotation to see all of the different cases which a policy will cover.
To find out more information about Professional Indemnity Insurance, call our PI specialist Alex Roebuck on 01482 323424. Whether you think you might need a PI Insurance quote or just additional support understanding how it can protect you, Hinks is happy to help.