Professional indemnity insurance can provide cover for businesses and individuals who deliver professional services from the legal costs and claims for damages from an act, omission or breach of duty that occurs as a result of their actions.
This insurance may provide cover should:
• An architect gets sued for creating a flawed house design after the owners had to pay to fix a flawed extension, or
• A marketing agency print a client’s brochure with incorrect contact details, resulting in the client commencing legal action against the agency.
It’s important to understand how this type of cover works because many people don’t think it applies to them. But it can provide an important line of defence in many different circumstances.
1. Cover is available in many different industries
Don’t assume you can only take out professional indemnity insurance if you are a member of one of the traditional ‘professions’. You don’t have to be a doctor or a lawyer to take out this type of cover. In fact, anyone who is in a role in which they provide advice should consider whether professional indemnity insurance could provide protection from litigation.
A lot of people like plumbers, treeloppers and builders give advice, but don’t buy professional indemnity insurance. But they may be exposed if a customer follows their advice to their detriment.
2. Professional indemnity insurance only provides cover when the policy is current
Professional indemnity insurance only covers policyholders while a policy is live. If you take out a policy, then let it lapse, you won’t be covered for claims that concern events that happened when the policy was active. This means professionals should consider whether they need to maintain professional indemnity cover even when they retire. In some professions, for instance accounting, there is a requirement to maintain cover even when you retire or leave the profession.
3. Understand any exclusions
Professional indemnity insurance is a complex area, and many insurers won’t cover certain risks in policies. For instance, most insurers won’t cover builders and other entities in the construction sector for any damages that relate to building cladding, given the problems many strata buildings have encountered with flammable materials. This means it’s essential to read the fine print in policies and develop a real understanding about which professional risks are covered and which are not.
Important note: This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. Please contact Aviso Specialty on 03 8544 1638 or visit to avisospecialty.com.au. Aviso Specialty (formerly Fitzpatrick & Co Insurance Brokers) has specialised in the horticulture and arboriculture industry for over 30 years, providing assistance and financial support to companies, associations and events.