What is Professional Indemnity / Error & Omission Insurance?
This insurance indemnifies the Insured against its actual legal liability for damages resulting from any third-party Claim for compensation first made against the Insured during the Period of Cover for breach of professional duty by reason of any negligent act, error, or omission committed or alleged to have been committed on the part of the Insured. It usually covers both the legal fees in defending the claim and, if found to be negligent, the cost of damages awarded against them in compensation. Even if you win a case still defense costs alone can be substantial. If a professional person or company provides advice that is negligent by way of an act, error, or omission, when compared to what is reasonably expected of a competent practitioner in that profession, then they can be held liable for a breach of their duty of care.
Who needs Professional Indemnity cover?
This insurance is particularly important for companies and individuals offering advice and professional services like chartered engineers, chartered accounts, medical practitioners, insurance brokers, and similar kinds of professional groups, etc.
How do the policies work?
Professional Indemnity policies are distinctly different from public and Products Liability policies in the time frame for which they cover claims. Usually, a Professional Indemnity policy is granted on a claims-made basis. Hence such policy provides cover for claims which are actually made during the policy period. Even if, a service is no longer provided or advice is no longer given or, or if a company ceases trading, the cover should continue to be purchased for several years afterward otherwise there will be no protection if a claim subsequently occurs
How much does Professional Indemnity cover the cost?
As with any insurance, it depends upon the type of profession, business revenue, limit of Indemnity required, and claims history.
General exclusions.
Some of the general exclusions are: – Prior pending litigations, Fraud, and dishonesty, assumed duty and obligations, Fines and penalties, Bodily injury, property damage, loss of revenue, etc.
Extensions
There are extensions granted for libel and slander, loss of documents, intellectual property, run-off cover, joint venture liability, etc.
Claims procedure
Once a claim is made against the insured, intimation should be immediately given to the insurance company. The Insured should not settle any Claim, incur any Costs and Expenses, make any admission, offer, or payment, or otherwise assume any contractual obligation with respect to any Claim without the insurer’s prior written consent. The legal cost and award will be honored by the insurer if it falls under the policy terms and conditions. Out-of-court settlements may be also honored based on the merit of the cases.