Professional Indemnity

Professional Indemnity (PI) Insurance

PI insurance protects ‘service’ businesses – i.e., businesses that sell their knowledge and skills – against claims for loss or damages made by clients, customers and third parties. If the business makes a mistake, or is found to have been negligent in one or more of the services it provides, PI insurance can cover the claim for damages and the associated legal costs.

The most common areas where a claim for damages can be brought against a business are:

  • Liabilities arising from the theft of a client’s or a customer’s money
  • Negligence, including a breach of duty of care
  • The loss or theft of a client’s or customer’s documents or data
  • The unintentional infringement of copyrights, trademarks and broadcasting rights
  • Passing off

Not every business is required to have PI cover in place, but it is a regulatory requirement for certain professions such as solicitors, accountants, architects, insurance and mortgage brokers and financial advisers. Businesses which provide creative services – i.e., advertising and public relations companies, graphic designers and copywriters for example – may also have PI insurance in place.

Many insurers accept claims only whilst the policy is in force, so PI policyholders who cancel their cover when they sell their business or retire, may need to arrange ‘run-off’ cover which continues for a pre-determined length of time.