You may consider it essential to have Professional Indemnity Insurance in place if your career or vocation requires you to provide professional advice or a service considered to be of a professional nature.
If you are working in a professional sector you may even consider covering yourself against civil liabilities that include breach of contract, tort, breach of statutory duty, breach of intellectual property and breach of fiduciary duty.
In our guide below we take a more in-depth look at some of these:
If you have a contractual relationship with your client, this type of cover could be essential to your business. The most relevant implied term in general commercial contracts is that the professional has a duty to act ‘with reasonable care and skill’. If your client can prove that you have failed to act in this way, and that they have suffered a loss as a result, they may sue you in order to recover damages.
Defences of such claims will often be based on the professional demonstrating that they did act with ‘reasonable care and skill’.
If you do not have a contractual relationship with your client and he/she becomes legally injured including a breach of their rights then they may well claim compensation from you under tort law. Tort can covers acts both deemed intentional and accidental.
Tort of negligence
This depends on the type of breach of ‘duty of care’ you are responsible for. You may have a legal obligation to adhere to a reasonable standard of care whilst performing any acts that could cause foreseeable harm to your clients.
In order for your client to win a negligence lawsuit claim, they will have to prove that you owed them a duty of care, that there was a breach of that duty, and that it was such breach that caused them a financial loss.
Tort of defamation
It may be possible that at some point in your career certain clients may claim that you have made defamatory comments about them. This is particularly important if you work in the publishing, marketing or media industries where your comments are generally more open to scrutiny.
In this instance, you could possibly be sued for defamation for both defamatory written and spoken comments, especially if these comments are incorrect as your client could claim they could cause them financial loss and damage to their own professional reputation.
Considering that defamation rewards could cost up to tens of thousands of pounds this may be an extremely important aspect of professional indemnity insurance to consider.
Other examples of Torts include:
• Intentional – Assault, Battery, False Imprisonment
• Property – Trespass
• Economic – Fraud, Conspiracy
• Dignitary – Invasion of Privacy
Breach of statutory duty
If you are an accountant, architect, quantity surveyor, or estate agent you may consider this as an important cover. If you are an accountant you will have statutory duties under the UK Company Acts. If you are an architect, quantity surveyor or any other construction-related professional you will also have duties under the Construction Design and Management Regulations.
If you are an estate agent you need to be careful not to fall foul of the Property Misdescriptions Act 1991. Unlike the UK Company Act and the Construction Design and Management Regulations, if your breach of statutory duty falls under the Property Misdescriptions Act 1991 you may have committed a criminal offence.
Please note that professional indemnity insurance will not pay criminal fines. However, it may cover any defence costs incurred.
The defence costs cover provided under professional indemnity insurance may operate in one of two ways:
The policy specifies the statutes which are covered and will therefore usually pay the defence costs of defending any actions under those statutes regardless of whether there is a professional indemnity claim for compensation to be considered.
The policy covers the defence costs incurred in respect of any statute but only so far as they are related to an outstanding professional indemnity claim. Insurers pay the accused individual the defence costs in order to assist in the defence of the main professional indemnity claim.
Some statutes have not only created the right to impose fines and/or other penalties but have created a right for your client to claim compensation from you. That is, the compensation would be payable to your clients under the Data Protection Acts or the Defective Premises Act.
Breach of intellectual property
There is always a possibility that your business could get accused of breaching intellectual property rights. These breaches can include copyright, trademark, patent, plagiarism, music rights and broadcasting rights.
This could be particularly important cover for professionals in the marketing and publishing sector who are producing content on a frequent basis.
Breach of Fiduciary Duty
The fiduciary duty is a legal relationship of confidence and trust between yourself and your clients and other parties if necessary, most commonly a fiduciary, or trustee and a principal or beneficiary. It means that your clients could sue you if they don’t perceive you to be acting in their best interest. This may be considered valuable cover in the unexpected eventuality that a relationship between you and your client breaks down.
Professional indemnity insurance extras
Professional indemnity insurance can be bundled with many additional extras. You will need to review each policy to identify the types most relevant to your needs. These options generally include the following:
• Loss of Documents
• Libel & Slander
• Intellectual Property
It is important to note that these types of add-ons may differ between insurers, so it is important to check exactly what is on offer in order to make an informed decision before purchasing a professional indemnity insurance policy.
Need a quote?
Just fill out the quick quote form on our professional indemnity insurance page, or give our UK based sales team a call on 08081686868.