Professional Indemnity Insurance
This insurance policy provides protection to professional people against their legal liability to compensate third parties who may sustain injury or damage to their property through the negligence of the professional person or that of their employees or due to breach of contractual duty.
Professional persons include:
- Stock brokers
- Architects and surveyors
- Doctors and clinical officers
- Insurance brokers
The basic legal position is that every person who enters a learned professional undertakes to bring to it a reasonable degree of care and skills. The professional person does not undertake to produce a certain positive result or to use the highest degree of skills but they must undertake to exercise a fair, reasonable competent degree of skills. Failure to do this may leave the professional person exposed to demand for damages by those who may suffer loss or injury as result.
Causes of Liability
The main causes of liability are:
- Breach of professional duty
- Breach of common law duty
- Breach of contractual duty
- Hedley-Byrne rule- occurs where a professional gives advice in the casual manner and the client suffers financial loss.
Professional risks may be classified into three categories;
- Where they may result in bodily injuries including death
- Where they can result in financial loss including loss or damage to properties
A professional Indemnity policy undertakes to indemnify the professional persons for damages or breach of professional duty which may be made against them during the period of insurance due to any negligence acts, errors or omissions committed in the course of business.
Cover is on “claim made basis” this means that, provided the claim is made during the period of insurance, it does not matter when the act of negligence giving rise to it took place.
The underwriter normally assesses the risk very carefully to see that nothing had happened in the past history of the proposer which would be likely to produce a claim in the future. Had there been such an occurrence, any resulting claim would be excluded from the policy. In the event of non- disclosure of a material fact, the insurer would be able to avoid the policy.
Costs incurred in the defense or settlement of a claim, with the written consent of insurers are also covered. The limit of indemnity is an aggregate for any one period of insurance rather than any one claim or occurrence.
The policy may be extended to provide cover for;
- Label and slander
- The dishonesty of employees
- Incoming partners – for work in previous practice
- Outgoing partners – for continuing liability for work performed whilst they are partners
- Loss of or damage to documents
- Breach of authority i.e. where the partner goes beyond their powers as agents of the business.
The Key Underwriting Fixtures
- Professional qualification of the proposer and or partners
- Total number of partners and staff
- The number of offices from which the business is conducted
- Claims history
- Indemnity limit selected
- Amount of deductible borne by the insured
- Years the company has been in operations
Libel and Slander Insurance
A libel and slander policy can be provided as an extension of a professional indemnity policy. It is not possible to provide indemnity in a general public liability policy because damages in this policy are awarded for injuries rather than those involving physical loss or damage.
The policy indemnifies the insured against liability at law for damages and claimant costs and expenses in respect of claims against the insured and notified during any period of insurance for:
- Infringement of trademarks, registered designs, copyrights or patents published in specified publications.
The policy also provides cover in respect of:
- Withdraw expenses sustained to the extent which such expenses cannot be avoided or curtailed less any saving or recoveries
- In giving effect to alteration to publications required by the insurers or by the order of the court.