Professional Indemnity Insurance (PII) explained

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When you purchase a Professional Indemnity policy, which of your past work is covered? How do you provide a fair presentation of your risk? What costs does it cover? What are the pitfalls to avoid? UKGlobal Bristol, a specialist insurance broker, explains all you need to know about Professional Indemnity Insurance.

Professional Indemnity Insurance (PII) is essential for businesses that provide advisory, consultancy and expert services, including designers, engineers, trainers, surveyors, architects, lawyers, accountants, IFAs, engineers, and many more.

The purpose of PII is to cover a business’ liability if there is an occurrence of professional negligence, error or omission, breach of professional duty or a civil liability matter, which causes financial loss to a third party.

This insurance is not compulsory under law, but the rules of some regulatory and professional bodies mean it is obligatory for some professions. It may also be required under contract.

Peace of mind

There are many types of negligence. In the context of most PII claims, negligence is where the client has not received the professional service that they were due.

How employees undertake their work is beyond a company’s control, leaving it exposed to liability claims.  PII gives peace of mind if an employee is negligent. Some policies can also include or be extended with fidelity coverage, to cover deliberate and dishonest acts from employees.

Policies can include intellectual property (IP) breach claims. These are where a company has used someone else’s work without their permission which has infringed their IP.  PII cover which includes civil liability, will also cover loss of libel and slander.

Why do you need it?

PII will give financial security for you and your business. This is the cost of defending legal action, and paying any compensation due, following an error in your work that could force the closure of your business. PII will cover your legal fees, court costs, and compensation awards, including any fines your client has incurred because of your mistake.

Advantages of having a PII policy

Having a PII policy can help you to:

  • Win business – potential clients may make it a requirement of a supplier to have PII to a certain limit.
  • Enhance your business' reputation – having PII gives your business a strong image and adds credibility. Your clients can be assured that should there be an error in your work, PII would deal with the legal issues arising from a claim and limit financial exposure.
  • Ensure business continuity – PII can reduce disruption and enable you to continue running your business. Without PII, you would be forced to defend any report of a claim against your business, no matter how genuine.

Important points to consider

The nature of the PII claims is that they can occur years after any work was undertaken. A long-tail liability claim brings additional complexity, and it is important to ensure you are correctly covered.

PII is usually written on a ‘Claims Made’ basis whereby cover is triggered when a claim is made against the insured during the policy period, regardless of when the wrongful act that gave rise to the claim took place, subject to the retroactive date. 

The retroactive date will typically be determined when you first purchase professional indemnity and is key to define which past work will be covered by the current policy. If you are buying PII for the first time, cover will probably start at inception date of the policy and no retroactive date will be offered. It is important make sure that you have continual cover every year without a break in cover.

The onus is on your business to ensure that you give a fair presentation of your risk to insurers. It is essential that you do this, as non-disclosure can put you in an unfavourable position in the event of a claim.

If your company has been sold, acquire or merged, it is important to update your policy and keep all entities (even previous names that no longer exist) under the policy so that any liability arising from that entity will still be covered.

Every business is unique, and the cost of your insurance depends on your own situation. The cost will depend on the profession, annual turnover/fees, claims history and level of PII cover and limit of indemnity, and excess that you select. The indemnity limit may be required by a contract or be a requirement of your industry body.  If choosing your own limit, ensure you consider the worst-case scenario that could impact your business.

The right protection

There are many pitfalls with selecting a PII policy. Choosing on price alone has drawbacks and understanding your liability and the limitations of your policy is key to putting the right protection in place. In addition, terms and conditions of PII policies can vary by insurer so be aware not all policy wordings and covers are the same.  

UKGlobal Bristol is a specialist insurance broker for the placement of PII. The cover it can arrange is underwritten on a claims made basis, meaning that the policy provides retrospective coverage for work undertaken historically. It also allows you to meet any contractual requirements you have entered, where it is stipulated that PII must be carried post completion of the work undertaken and provided.
 
Its extensive market access and specialist knowledge helps UKGlobal Bristol to offer competitive premiums and importantly, constructive support and guidance on PII claims and arranging the correct cover.

UKGlobal Bristol's offering to CABE members

  • Bespoke insurance arrangements to ensure the cover correctly meets Member needs, reflecting the exposures they face and contractual liabilities
  • Competitive quotations, together with insurer commitment to a set level of cover and service
  • Access to a free Legal Helpline for all CABE Members (Monday-Friday 9am-5pm), managed by international law firm Clyde & Co LLP
  • Free Collateral Warranty checks for Members who place their PII with us
  • Claims handled in-house by PII experts
  • Face-to-face meetings available either prior to, during, or after insurance renewal
  • Prompt turnaround on all enquiries
  • Option to spread the insurance costs over monthly payments

 
For more information please visit UKGlobal Bristol's website or to arrange a chat, please contact:

Thomas Vigliucci
Director

T: 0117 456 9097
E: [email protected]

Tim Grant Cert CII
Director

T: 0117 456 9098
E: [email protected]

 

Webinar Wednesday

Tim Grant, Director, GlobalUK Bristol, will be hosting a CABE 'Webinar Wednesday' on 19 February. He will cover how to present your business to get the best insurance terms for your PII. The session will also cover why it is important to review your insurance programme, and your provider.

The webinar will also include case studies and UKGlobal will introduce the Professional Risks Team and explain what they do and how they are able to help CABE members.

Find out more and sign up for free here.

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