Professional Indemnity (PI) insurance has many other names, such as Professional Negligence cover, Errors & Omissions or as Dennis Norden might say (and most descriptive of all) ‘Cock Up Cover’.
However compelling the argument against the need for PI cover, it will not stop a claim for compensation if the complainant believes that your negligence has resulted in their financial loss.
Where Public Liability & Products Liability cover provides protection against claims for physical damage or injury, PI Cover will protect you against claims made for financial loss which has resulted from professional negligence.
There are situations and professions (such as insurance brokers, accountants, solicitors, architects etc.) where it is easy to see how and why claims could arise and, in those situations, steps can be take to guard against them. However, claims of this type can arise from almost any source and do not necessarily have to involve advice or design which has been paid for.
As it is impossible to foresee all potential claims; and therefore, by definition, you cannot predict how they will arise, the PI wording is deliberately very wide and covers almost any given situation arising out of the policyholder’s professional activities.
You should assess your need for PI cover, not only against the likelihood of a claim arising, but also against your ability to deal with a claim. Without insurance you will have to defend claims yourself and in many cases spend time and money dealing with what is often no more than a spurious reason to avoid paying your bill. If you have insurance in place, these allegations can be dealt with by the insurer’s experienced and expert claims staff and this all but removes you from the loop.
Where you elect to purchase PI cover you should assess the level of compensation you are prepared to meet out of your own funds, without involving the insurers. The policy normally has a minimum excess, but increasing this can have a significant effect on the cost, and arranged on the correct basis, will only apply to the damages and not the costs, which means you have nothing to pay where a claim is successfully repudiated.
Finally, even if you really believe you do not need PI insurance, the contract you have been asked to sign for that big order may require you to have it anyway and it could be well worth putting it in place to close the deal!
The cost of PI cover may be lower than you think, and for the cover it provides, PI insurance is often good value.
What price peace of mind?