As we move increasingly into a service based economy, professional indemnity coverage becomes an increasingly essential part of any businesses’ insurance coverage. If your business provides any form of service or advice, Professional Indemnity coverage may warrant a closer look.
What is Professional Indemnity Insurance?
Professional Indemnity insurance is a form of coverage that seeks to protect the insured in the case that their specialist service or advice was deemed to be negligent and resulted in some form of economic loss to their client.
Professional Indemnity Insurance also covers the cost of legal expenses incurred while responding to or managing claims which are covered by the policy.
Who needs Professional Indemnity Insurance?
If you’re a business who provides specialist services to other parties, or if one of the core activities of your business is to provide advice or if you handle sensitive data, a professional indemnity policy would be a necessary part of your insurance coverage
Examples of professions include:
- Auditors
- Architects
- Engineers
- Financial Advisors
- Consultants
- Interior Designers
- Lawyers
- Mortgage Brokers
What does it cover?
Professional Indemnity Insurance will cover the legal fees, and any compensation payments if a client suffers some form of financial/economic loss as a result of your work.
This includes, but is not limited to:
- If your business makes a mistake while providing advice, or provides bad advice
- If you lose/share sensitive client data
- If you publish a false statement that damages a person’s or company’s reputation
Case Studies
Case Study 1
You as a consultant have provided advice to a client, and shared a deliverable to them on how to reduce their operational costs. The client enacted your advice, however later on felt by doing so they encountered some form of financial loss due to a drop in productivity and are holding your business liable for the revenue loss. Your professional indemnity insurance policy would cover the legal fees entailed with defending the case, as well as any compensation payments which may be due
Case Study 2
You are an architect responsible for designing and managing the construction of a new building. At the end of the building construction, it is realized that it will not comply with property regulations in the area and will not be accessible until further modifications costing AED 30,000,000 are made. The developer of the building holds you as an architect responsible for these additional costs. Your professional indemnity policy would cover the compensation to the developer, as well as any additional legal fees entailed.
