What is professional indemnity insurance?
Professional Indemnity policies indemnify insured’s for amounts which they become legally liable to pay as a result of any actual or alleged negligent act, error or omission in the conduct of their business or profession. Costs and expenses incurred to investigate, defend or settle any claim are also included, in some circumstances in addition to the policy limit, otherwise inclusive of the limit.
A professional is defined as “anyone who gives expert advice and/or services to another person”. No matter what type of advice, design or area of the professional’s occupation, errors and omissions can occur.
Financial loss arising from a mistake or failure by a professional may result in an award in favour of an external party (often your client). Under the Trade Practices Act (1974), you may be deemed liable for mistakes, errors or omissions, even if the act was not negligent.
A Professional Indemnity policy is designed to protect the personal assets of a professional against damages awarded against them. It also covers the costs and expenses of defending claims.
Public and Products liability policies generally exclude claims arising for breach of professional duty, particularly where there is a fee paid for advice or a service. Public liability policies also don’t provide cover where there’s only financial loss, which are generally insurable only under a specialist Professional Indemnity insurance policy.
The Trade Practices Act 1974 also creates an exposure for false and misleading conduct in the promotion and sale of goods and services.
A special suite of products have been designed for the IT Industry catering for the provision of IT and telecommunications products and services. These products often include both Professional Indemnity Limits and Public Liability/Products Liability limits – the main purpose of this is to close gaps in products liability, further broadening this cover to include financial loss along with property damage and bodily injury exposures in the use of the Insured’s products.