Professional indemnity insurance is a type of insurance which covers individuals who provide advice or services. Although it is not compulsory for all professional industries, it’s still a good idea to have insurance. In this article, we’ll explain how it works, what it covers, and the benefits of being covered.
What is it?
Professional Indemnity Insurance is a type of insurance which is common in professional industries. Experts who work in professional industries (such as accounting and law) provide advice to clients, but what happens if this advice falls short? This is where professional indemnity insurance can help. For example, if you are a lawyer and are responsible for filing a particular document, a failure to lodge the document on time can be detrimental to your client’s case. Your client may then decide to take legal action against you. Professional Indemnity Insurance can protect you and your business by covering claims made against you, including some legal costs.
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Browse nowProtection against claims of negligence and malpractice
Claims of negligence or malpractice can not only risk your reputation, but also your business itself. Clients expect quality service, however professionals sometimes make mistakes. Negligence claims can arise where a client has suffered loss where ‘reasonable care and skill’ has not been exercised, that is, a professional fails to fulfil their duty of care. If a client can prove that your failure to fulfil your duty of care directly caused harm or loss, then they are entitled to receive damages.
Malpractice, whilst similar to negligence refers specifically to professionals within an industry. Malpractice occurs where a professional fails to provide adequate care and fails to work to the standard required by the professional body they belong to. For example, a doctor who fails to provide care to a patient as required by the Australian Health Practitioner Regulation Agency (AHPRA) will have engaged in malpractice.
Professional Indemnity insurance provides protection for financial losses for any legal action taken against you, including negligence and malpractice claims. It covers legal fees, as well as damages awarded against you.
Protection against professional misconduct claims
Professional misconduct is behaviour that fails to meet the professional standard established by a professional body. A good example of this is where a lawyer overcharges a client, which is unethical according to legal professional standards. Findings of professional misconduct can result in fines or even loss of licence to practice. In this case, professional indemnity insurance can cover your financial costs.
It may be mandatory
Many industry bodies require professionals to have professional indemnity insurance. For professionals who are required to be members of an industry body to practice, they may not be able to provide any services until they have professional indemnity insurance (this is the case for lawyers, doctors and accountants). However, even if your profession does not require you to have it, it is a good idea to.
