An Engineers Guide To Understanding Professional Indemnity Insurance

Professional Indemnity insurance* is something that you may have heard of as an engineer. We’re going to break down the basics, without the jargon and explain the ins and outs of what this kind of insurance provides cover for, what it doesn’t cover and some interesting things you may not be aware of with this kind of policy. 

Professional Indemnity insurance explained 

In a few words, Professional Indemnity insurance can be defined as:  

Professional Indemnity (PI) insurance is an important form of protection for businesses that provide specialist services or professional advice. It is designed to respond to claims against your business for losses as a result of actual or alleged negligent acts or omissions in the provision of your professional service or advice. PI Insurance will also assist with the legal costs associated with responding to or managing claims which are covered by the policy. 

What a policy typically covers 

Each Professional Indemnity insurance policy will have its own Product Disclosure Statement (PDS) which will outline what is included and excluded in your policy. These are some of the things your policy may typically provide cover for: 

• Providing your client with misleading or negligent advice 
• Breaching your professional duty 
• Confidentiality and other privacy breaches 
• Defamation, libel or slander 

• Loss of or damage to documents 
• Infringement of intellectual property 
• Payment of compensation as a result of a claim, including but not limited to Court awarded damages 
• An award of legal costs against you 
• Reasonable legal costs incurred in defending or responding to the claim 

• Claim investigation costs 
• Disciplinary proceeding costs 
• Depending on the type of Professional Indemnity insurance policy you have, it may extend to provide cover for public relation costs to help protect your business’ reputation 

These are some of the things that your policy may not provide cover for: 

• Intentional damage or misconduct 
• Contractual liabilities 
• Professional fees refunds 
• Known claims and circumstances that may have occurred prior to the period of insurance 
• Acts of fraud and dishonesty 

• Accidental injury and property damage (these kind of claims would typically be covered by Public Liability insurance*) 

What may cause a Professional Indemnity claim? 

Even when you are meticulous about your work as an engineer, the reality is things can go wrong and claims can occur. A claim can have significant impact upon your business, so it is important to understand how Professional Indemnity insurance provides protection when your engineering business may need it most. 

• giving incorrect advice 
• a miscalculation 

• incorrect diagnosis or treatment 
• an act, omission or breach of duty 
• engaging in misleading or deceptive conduct 
• loss of documentation 
• inadvertently defaming someone 

• failing to meet a deadline 
• not meeting your clients expectations 

A Professional Indemnity insurance claim example 

The insured was the project manager for construction of a group of retirement homes with an adjoining clubhouse. The claimant alleged that the project manager has caused them to pay the construction invoice for subcontractor fees under the mistaken belief that the entire sum was payable, and the amount that was paid exceeded the total amount payable.  

The claim went to mediation and the insurer paid a settlement sum of $750,000 and an additional $100,000 in legal fees. ^ 

How much will Professional Indemnity insurance for engineers cost? 

There are a few factors that go into calculating the cost of an engineering Professional Indemnity insurance policy. There’s no one price suits all kind of premium, with each and every business and their individual factors taken into account when calculating the associated risks and cost. 

Some of these factors may include: 

• the type of engineering business you own 

• any previous claims 
• the number of staff you have 
• your turnover 
• the location of your business  
• The amount of Professional Indemnity insurance your engineering business requires 

We know how hectic life can get and making spare time in the day to shop around for your engineers Professional Indemnity insurance isn’t always easy to do. So, when it comes to getting insurance for engineering consultants in place get in touch with BizCover today. We will happily do the shopping around for you.  We believe in making the process to get your cover sorted easy and simple, with no-dramas! 

Visit bizcover.co.nz and get your engineering insurance policies sorted without the stress so you can get on with your day. If you’d prefer to pick up the phone and chat, you can find us at 0800 249 268. 

*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. © 2023 BizCover Limited. 

^ The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover.