Professional Indemnity Insurance (PII) is applicable to persons or organizations providing services mostly depending on personal skills and knowledge. It is the protection or cover against subsequent claims by the erstwhile client(s) for loss or damages which have happened due to involuntary negligence or ignorance. Professional Indemnity Insurance for solicitors is mostly prevalent in the current market along with consultants, engineers and accountants, although it is increasingly being sought after by professionals in an advisory or supportive capacity.
Areas Covered under PII
The main coverage of PII extends to the breach and/or negligence during the administration of professional duty, but it may also cover other areas as per mutually agreed policy terms as listed below.
- Defamation claims by the client(s)
- Misleading or deceptive professional conduct of the insured party
- Breaching the intellectual property rights of the associated parties
- Insurance against damage claims for fraudulent practices of the insured party
- Self-defence costs are also covered for fighting such claims against professional practices followed in the past or present
Prevention against Claiming PII
With PII, although the insurer is covered against financial losses, there is still tarnishing of his or her professional image which is difficult to redeem. To avoid such a situation, it is best to follow certain practices which minimize the possibilities of such a claim in future. This includes keeping abreast of the latest rules, policies and court hearings in the case of the legal practitioners. This applies particularly to those specializing in environmental, health and safety areas of the judiciary.
Another proven way to minimize future unprofessional conduct allegations is to practice detailed documentation of the work or the project. Minute records of the person’s involvement, advice offered and its actual implementation will stand in good stead to any subsequent scrutiny. This practice is of utmost importance in high-stakes projects where the advice or involvement was supposed to minimize the actual risk.
Before any such involvement, the professional should clearly understand the responsibility, division of work and its hierarchy, so that the purview of his or her job is defined properly.
Important Considerations Regarding PII
The insurer will only consider ‘live’ claims – this means that the policy Professional Indemnity Insurance for solicitors, for example, needs to be valid both during the actual incident and the time of the benefit claim. This directly leads to the consideration for law practitioners the point that they might need PII even after retirement. This also applies to various other professionals working in an advisory capacity in potentially sensitive areas. Also, in the case of changing the insurance provider, be sure that they accept past liabilities of the insured party. It is good practice to consult an experienced insurance adviser before finalizing the policy to ensure the right cover level is being provided.
So, professional indemnity insurance is an essential option for various professionals working in an advisory capacity. It helps to cover potential costs while contesting loss claims by clients who have taken advice in the past or present. Proper prudence is required while considering PII policy and avail its benefits while avoiding situations giving rise to such claims is the best practice.