Professional Indemnity protects you and your business against claims that your work or advice has cost your client money. It’s an invaluable cover for anyone providing expert advice or services, but since every business is unique professional indemnity policies vary hugely from one to the next.
Tables of Contents
- What does professional indemnity insurance not cover?
- What is a professional indemnity exclusion clause?
- Professional indemnity insurance exclusions
- Common professional indemnity exclusions
What does professional indemnity insurance not cover?
Professional indemnity insurance policies typically will not cover any accidents or events which are covered on other policies. For example it’s common to see accidental injury of employees or third parties excluded on a professional indemnity policy because this is covered under Public Liability or Employers Liability policies. Underwriters can add other specific exclusions to your policy depending on your business activities, and it’s important to understand how these can impact you in the event of a claim.
What is a professional indemnity exclusion clause?
A Professional indemnity exclusion clause is an amendment to the standard policy terms and conditions, which removes, limits or changes those standard terms. This means that claims originating from excluded causes will not be covered on the policy, or perhaps only covered to a lower level than the main policy cover amount. They are usually added to reduce the risk an insurer is taking, but often this can pass more risk on to you.
Professional indemnity insurance exclusions
Whenever a non-standard exclusion is added, insurers are required to inform you of how their usual policy has been changed. Still, it’s important to read all quote documents when comparing policies, as it is your responsibility to make sure the normal policy terms and conditions are right for you. Don’t be afraid to spend time discussing the policy with your broker or insurance company; they have a responsibility to make sure you fully understand your cover.
- A health and safety consultancy policy will cover advice given on how to remain compliant with regulations, but insurers don’t want to extend that cover to taking responsibility for a facility’s health and safety, so they exclude claims arising from taking direct responsibility for health and safety day to day on site
- An IT professional policy will cover all software modification and amendment with the exception of work on live systems (where a mistake can be immediate and catastrophic), so the policy has an exclusion for this, or an amendment requiring multiple client signoffs before any changes are made live.
- An insurer is happy to provide a policy for domestic accountants, but doesn’t wish to risk large claims from overseas clients, so they add a ‘sub limit’ to all accountancy policies for any and all work overseas. The policy may be for £1 million, but overseas work is only covered for claims up to £250,000. This means that £250,000 is the most the insurer will pay to defend such claims, even if the claim is for more.
Common professional indemnity exclusions
Efficacy exclusions in professional indemnity policies
Efficacy, inefficacy and failure to perform; these terms are usually applied to claims arising out of your products or services not performing as they were intended. This is often excluded under professional indemnity policies as it is usually part of Public Liability policy coverage. It’s worth asking about if you fit or install products such as fire alarms or computer systems, but more likely to be included with Public and Products Liability policies (on request).
Professional indemnity consequential loss exclusion
Consequential loss refers to damages or financial losses which your clients suffer indirectly due to your mistake in providing a service or advice. A good example is in manufacturing, where a mistake in programming a production line computer could result in the line being shut down for hours or even days. The profit loss incurred by your client is a consequential loss. Your insurance policy would cover a claim for your fees as a professional, but not any profit loss claims against you.
Professional indemnity property damage and bodily injury exclusions
If you provide a service or advice which could ultimately cause injury or damage if incorrect (such as health and safety consultancy, dietary or beauty advice or other therapeutic services), it’s crucial that you check your policy terms and conditions, and even directly ask your insurer if these claims are covered or not. If you absolutely need this coverage, you may require a medical malpractice policy.
Professional indemnity medical malpractice exclusions
Medical malpractice is often excluded (or just not specifically covered) by professional indemnity policies. The key difference between medical malpractice and professional indemnity policies is that medical malpractice policies often do cover bodily injury or property damage as a result of your services, including mental or psychological damages. If you provide services such as medical advice, therapies, tattooing or even non-invasive beauty treatments, you will likely need medical malpractice cover.