Professional indemnity – what can go wrong?

15/09/16 General

Professional indemnity claims are many and varied.

As a professional it’s vital that you have adequate professional indemnity insurance in place-here are some examples of things that can go wrong:

ERRORS

An advertising consultant added the wrong telephone number in an ad. This resulted in a reduction in sales, the resultant income and a poor image of the brand. The consultant’s client claimed successfully for loss of income and damage to its brand. The costs of the claim were covered under the consultants professional indemnity insurance.

In the course of making a back-up of a client’s hard disks, which was part of the service he was contracted to do, an IT consultant inadvertently overwrote all of the data on the client’s hard drives. The data could not be retrieved. The client sued for damages.

A safety consultant was successfully sued for £75,000 damages after a man was injured when he fell from scaffolding approved by him.

DESIGN

As a result of inadequate design by an engineer, air extraction and temperature control equipment in a restaurant failed to work properly. The restaurant was closed pending repairs. The claim was settled at £150,000 plus costs under the engineer’s professional indemnity insurance.

No-one wants to make a mistake in their work but even the most qualified of professionals can make mistakes.

If you are alleged to have provided inadequate advice, services or designs to a client, professionals can find themselves faced with some hefty expenses.

Professional negligence, loss of documents or data, unintentional breaches of copyright/confidentiality, loss of goods/money can all lead to expensive claims. As can defamation and libel cases, which are becoming increasingly common.

Whilst most businesses enjoy good relationships with their clients, one small mistake can change this overnight, especially should the clients suffer a significant loss as a result of the mistake.

The business world is constantly changing and it is not just those with technical expertise that can face claims. Corporate scandals, increased shareholder awareness and extended rules on corporate governance have made being a company director an increasingly difficult task.

Stakeholders have far greater forms of remedy against individual directors and there is an increased willingness to pursue claims against them.

Once a claim is alleged against a director or professional for any wrong doing they have two sources of protection ñ they can either turn to their company to seek indemnification, or they can seek assistance from their company’s professional indemnity(PI) policy.

Many professional and industry bodies and regulators require professional indemnity insurance for practicing members. These include accountants, engineers, surveyors and doctors.

Most professionals working on a contract basis will almost certainly need PI cover, as many clients request this to be in place before a contract is awarded.

Whether or not the individual is ultimately held responsible, the defence costs associated can be extremely expensive and the process can take months or even years of their time.

For directors, a form of professional indemnity policy called Directors and Officers provides personal asset protection should the employer’s indemnification fail for any reason.

For the company, a policy provides balance sheet protection where the company has indemnified its directors.

It is not only the directors of large companies that need to be protected. If an SME does not have D&O insurance, directors face a greater risk of not being able to defend themselves.

SMEs face exactly the same risks and regulations as their larger peers and often do not benefit from in-house HR or legal teams when faced with a claim.

Claims from employees and regulators are particularly prevalent and may involve anything from unfair dismissal, discrimination to health & safety misdemeanours.

Without the correct insurance the directors’ personal assets are at risk. To find out more about how you can protect yourself and your business get in touch with us today.

Contact us for advice and help on getting the insurance cover you need for your profession.

Sources:
https://www.markeluk.com/articles/what-isprofessional-indemnity-insurance
http://www.willisfinexglobal.com/pi_contractors.html
http://www.willisfinexglobal.com/dando_directors.html
https://www.abi.org.uk/Insurance-and-savings/Products/Business-insurance/Liability-insurance/Directors-and-officers-liability-insurance
http://insider.zurich.co.uk/market-expertise/justcorporates-smes-need-cover/