For a consultant, architect, technology provider or other professional service firm, the value delivered often lies in expertise and advice. If a client alleges that an error caused financial loss, the resulting dispute can be costly even when the allegation is contested.
WHAT PROFESSIONAL INDEMNITY MAY COVER
Depending on the policy, professional indemnity insurance may respond to specified claims arising from professional services, including certain negligence allegations and related legal defence costs.
Coverage is not automatic for every dispute. Intentional wrongdoing, known circumstances and particular types of liability may be excluded or treated differently under the wording.
CHECK THE POLICY STRUCTURE
Review the definition of professional services, limits of indemnity, deductibles, exclusions and whether defence costs reduce the available limit. Some policies operate on a claims-made basis, making notification requirements and retroactive dates particularly important.
Consider whether your contracts require particular limits or types of insurance. The scope of cover should reflect the work you actually perform, not just your firm's broad industry category.
REDUCE THE RISK BEFORE A CLAIM
Use clear engagement letters, document client approvals, maintain quality-control processes and communicate changes in scope promptly. Keep relevant records in line with applicable requirements.
Tell your insurer about circumstances or claims as required by the policy and seek guidance before making admissions or agreeing to settlements where the wording requires it.
Insurance is one part of professional risk management. Clear contracts, careful delivery and appropriate cover can work together to protect a practice.
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Consult our IRDA-certified insurance advisors (IC38) for independent term life insurance, comprehensive family floater health plans, and corporate risk coverage.
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