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<h2 class="wp-block-heading"><strong>What is Professional Indemnity Insurance?</strong></h2>
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<p>Professional indemnity insurance is a form of liability insurance that provides cover for the financial consequences of professional negligence, following a breach of professional duty by way of neglect, error, or omission.</p>
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<p>In addition, an indemnity is provided regarding the legal and other costs and expenses incurred in the defense of any claim. The general philosophy in the litigious world that we now live in tends to be if something goes wrong, somebody must be to blame, and that somebody has to pay.</p>
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<p>A consultant cannot ignore an allegation of professional negligence. The allegation must be defended or admitted, and as a result, there will be cost implications in either case. Professional indemnity insurance provides the ultimate safety net when all else fails.</p>
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<h2 class="wp-block-heading"><strong>Who needs it?</strong></h2>
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<p>Any professional person providing advice, design, specifications, supervision, etc., whether for a fee or gratuitously, owes a duty of care to their client, and third parties.</p>
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<p>The duty of care owed is generally the exercise of “reasonable skill and care”, in the discharge of the services provided. If a consultant fails to exercise this duty (i.e. is negligent) they may be liable for losses incurred by their client and third parties. Taking into account the operation of the present legal system, even proving innocence can be very costly.</p>
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<h2 class="wp-block-heading"><strong>It is designed to protect the Consultant</strong></h2>
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<p>A Consultant purchases professional indemnity insurance for his protection. The cover is not for the benefit of the Consultant’s Client, although far too often, it is not seen that way. Clients cannot claim directly against the Professional indemnity cover carried by the Consultants</p>
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<p>- they must prove liability first, a process which can be time-consuming, expensive, and uncertain.</p>
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<h2 class="wp-block-heading"><strong>How does liability attach?</strong></h2>
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<p>Personal liability attaches where a practice operates as either a sole proprietor or a partnership. In the case of a partnership, liability is joint and several. Even when a practice ceases to operate, these personal liabilities do not come to an end, but continue for the limitation periods in contract and tort.</p>
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<h2 class="wp-block-heading"><strong>What can consultants be liable for?</strong></h2>
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<p>First, any potential plaintiff must prove negligence on the Consultant’s behalf, (i.e. a failure to exercise reasonable skill and care in the discharge of its services).</p>
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<p>A claim can be brought in contract or tort. It is often more difficult to succeed in a claim in tort as the following tests must be satisfied:</p>
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<li>the plaintiff must prove that the consultant owed him a duty of care.</li>
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<li>the plaintiff must prove that the consultant has breached that duty.</li>
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<li>the plaintiff has suffered financial loss as a direct result of that breach.</li>
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<p>If an allegation of negligence is upheld the Consultant is likely to be liable for the losses incurred by the plaintiff which arise as a reasonably foreseeable consequence of the Consultant’s actions. The Consultant will often be responsible for the plaintiff’s legal costs and these can be substantial. It is often the case that large sums of money are spent simply trying to recover fairly minor losses.</p>
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<p>Direct financial losses (economic and consequential loss) as opposed to the cost of rectifying a defect are implicit under contract unless specifically excluded.</p>
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<h2 class="wp-block-heading"><strong>What is the extent of cover?</strong></h2>
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<p>Professional indemnity insurance provides only limited cover against the consequences of claims for Professional Negligence. Unless contractual limitations have been agreed between the consultant and his client, the Consultant’s liability:</p>
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<li>is unlimited in amount, and,</li>
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<li>extends over a considerable period.</li>
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<p>Professional indemnity insurance, by contrast:</p>
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<li>will have a set limit on the amount that insurers will pay,</li>
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<li>the limit of indemnity,</li>
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<li>operates for a set period,</li>
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<li>the period of insurance,</li>
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<li>is subject to the policy terms, conditions, limitations, and exclusions.</li>
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<h2 class="wp-block-heading"><strong>Unique operation of Professional Indemnity Policies</strong></h2>
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<p>Professional indemnity insurance operates on what is known as a “claims made” basis. This means that it is the policy in force at the time the claim is notified which will operate, irrespective of when the work was undertaken or when the alleged act of negligence took place.</p>
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<p>The ability of clients or third parties to bring claims many years after services are complete (subject to the relevant limitation periods) emphasizes the importance of maintaining cover in the future.</p>
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<h2 class="wp-block-heading"><strong>Limits of Indemnity</strong></h2>
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<p>The limit of indemnity is the maximum amount that can be claimed from insurers for the Consultant’s liability to pay claimant damages. Defense costs may also be paid in addition to the limit of indemnity in certain policies.</p>
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<p>Disclosing the limit of indemnity to a client does not lead to a limitation of liability, which can only be achieved by negotiating a specific financial cap as part of the Consultant's appointment.</p>
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<p>The limit of indemnity operates in one of two ways:</p>
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<p><strong>Each and every claim cover</strong> - this means that the indemnity limit applies separately to each claim that is made under the policy. However, all claims arising from the same occurrence would be regarded by insurers as one claim.</p>
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<p><strong>Aggregate cover</strong> - the limit of indemnity would apply as one single amount for all claims made in each period of insurance.</p>
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