How do professional indemnity claims work?

This form of indemnity insurance covers both the cost of a claim for compensation the business is legally liable to pay (eg a settlement negotiated out of court, or damages and expenses awarded in court) and also the costs of defending a claim.

Are professional indemnity policies claims made?

Conditions of your cover Professional indemnity cover is usually offered on a claims-made basis. This means that your insurer will only cover you for claims that are brought against you during the term of your policy.

Why is professional indemnity insurance written on a claims made basis?

Professional indemnity policies provide a ‘claims made’ basis of cover because professional errors in construction, accounting, legal etc. Therefore, a valid professional indemnity policy or ‘run-off’ policy must remain in force at all times for a claim to be met by an insurer.

What does professional indemnity insurance cover you for legally?

Professional indemnity insurance protects you and your business against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.

Does professional indemnity insurance cover gross negligence?

Depending on the policy purchased, it will cover negligence, errors and omissions, breach of duty and civil liability. Professional indemnity insurance should also cover the liabilities which are the result of negligence, such as business interruption and the significant legal costs incurred from being sued.

What is not covered by Professional Indemnity insurance?

Professional indemnity insurance can cover compensation payments and legal fees if a business is sued by their client for a mistake they’ve made in their work. Bear in mind, however, that professional indemnity insurance does not cover you for the cost of any reputational damage that the mistakes have caused.

What does on a claims made basis mean?

A definition A ‘claims occurring’ basis covers claims that occur during the policy period irrespective of when the claim is made. A ‘claims made’ basis covers claims that are made and reported during the policy period only and not once the policy period is over.

Is professional indemnity the same as professional liability?

Professional Liability (also known as Professional Indemnity) allows whole the practice team to do their jobs without always looking over their shoulders. Professional Liability insurance covers claims that are actually made while the policy is in force, even if the error causing it happened years ago.

How long should you keep professional indemnity insurance?

six years
Traditionally, run off insurance would be maintained in this way every year for up to six years. Six years is the period many professional bodies require their members to carry run off PI for, this is therefore a good benchmark to use for all professions.

Is professional indemnity the same as employers liability?

Different types of business insurance cover different risks. Public liability insurance covers compensation claims made by a member of the public, while professional indemnity insurance covers you if you’re sued by a client. Employers’ liability insurance covers compensation claims from employees.

Is professional indemnity the same as professional negligence?

While professional indemnity insurance protects against professional negligence claims, proceedings are increasingly being brought against the individual directors of the companies that have provided a service. In this instance, you should consider arranging a separate cover know as directors and officers insurance.

What is professional indemnity insurance and do I need It?

Professional Indemnity policies are designed to protect a business for errors made when providing advice and services to their clients. They are often referred to as Civil Liability policies. Not only will the policy cover the costs of the damages, but it will also cover the legal defence costs associated with investigating and defending a claim.

What happens if I fail to lodge a professional indemnity claim?

If you fail to lodge this incident to the insurer until Policy period 3, the insurer is within their rights to decline the claim. It is imperative that a Professional Indemnity claim or incident be notified to the insurer as soon as possible and within the policy period you are notified.

How long does it take to make a professional indemnity claim?

You’d be surprised how much difference that makes when making a professional indemnity claim. How long this takes is anyone’s guess. The initial stages can be over in just a few days, but even a spurious allegation is likely to take at least a month or two to tail off.

What does ‘claims made and notified’ mean?

Most Professional Indemnity policies are offered on a ‘claims made and notified’ basis. This means that the claim will go against the policy in place when it is first notified . This is why it’s important to notify claims as soon as you FIRST BECOME AWARE.