Professional indemnity insurance, also known as PI insurance, is a form of insurance to protect individuals against claims of negligence against their skills or knowledge. Individuals including professionals such as architects, accountants, solicitors, insurance brokers, financial advisors, or mortgage intermediaries are required to have such insurance so that should they be sued for negligent conduct, financial backing is in place to provide settlements and legal costs. Additionally, many other professionals also choose to have PI insurance to protect themselves including designers, advertising and public relations groups, and consultants.
PI insurance is vital in this increasingly litigious age that should a claim be filed against the insured for bad advice or negligent work, there is the financial backing to defend themselves in a legal battle, or to settle out of court. By the nature of these types of policy it is vital for the insured to ensure that when they take out cover they plan for possible future claims, even when they have retired or closed down their business. This is because PI cover is normally designed to be limited to when the policy is active, meaning that even if an individual has stopped practising, insurance still needs to be in place in case a retrospective claim is made against them. If no ‘run-off’ cover is in place, the previously insured individual could face significant personal financial costs.
In addition to taking out Professional Indemnity insurance, one of the best ways to reduce your risk of claim is to carefully document all proceedings and enter into a client contract that clearly sets out specific responsibilities. By clearly documenting everything through any client’s project, you can minimise future claim risk.