What Is Professional
Indemnity Insurance?

What is Professional Indemnity Insurance?

Professional Indemnity insurance is designed for professionals who provide advice or a service to their clients. If someone alleges that you’ve made a mistake, overlooked a critical piece of information, misstated a fact or they have misinterpreted you in the course of your work resulting in a financial loss for your client, they may take legal action against you to recover those losses. Whether or not the allegation is true, Professional Indemnity insurance seeks to protect both your assets and your reputation, as well as the contents of your back pocket meaning you can continue running your business without the stress of financial or reputational ruin should a claim arise.

The risk of a claim being made against you isn’t always determined on your skill or level of professionalism. There is always the risk of an unhappy client making a claim against you, and whilst you can’t control this, we’re here to make sure you have some control in what happens next.

Did you know?

Some occupations are required by law or their professional association to buy and maintain Professional Indemnity insurance in order to work in New Zealand.

What does Professional Indemnity insurance cover?*

There’s a lot that could go wrong when you’re in the business of providing advice or professional services to clients. Thankfully, Professional Indemnity insurance can help protect your bank account and reputation against a variety of common claims, including:

• Providing negligent or misleading advice
• Breach of duty (confidentiality and other privacy issues)
• Defamation, slander or libel
• Intellectual property and copyright infringement
• Bodily injury or illness caused from the professional services covered under the policy

Professional Indemnity policies typically covers the costs of:

• Legal defence related to an approved claim
• Investigating a claim including those by a professional body
• Responding to a disciplinary inquiry
• Court attendance
• Public relations

What is not covered by Professional Indemnity insurance?*

While Professional Indemnity insurance can provide small businesses with many important protections, it typically does not cover:

• Damages that are intentional or deliberate
• Claims or circumstances that are known prior to the period of insurance
• Fraud and dishonesty
• Accidental injury and property damage

*Your policy wording will provide complete details of what is and is not covered by your policy.

Could this happen to your business?

No matter how good you are at your job, we’re all human and we all make mistakes. Professional Indemnity Insurance allows you to cover yourself if, and when, you do slip up in your normal course of work.

Here is a real-life claim example:

A quantity surveyor attended an onsite meeting and misunderstood the verbal description and specifications of the building project. When looking at the drawings, he had a pre-conceived notion of what was to be plastered and what was not. When the time came to pay, the estimate was out by many thousands of dollars. The Project Manager looked to the quantity surveyor who had made the error and asked him to pay for the variation of cost. The surveyor’s insurer recognised his liability and made a quick settlement offer. Interestingly, the settlement was way more than the fees actually earned for the job. Remember, a $1,000 fee contract can potentially generate millions in liability if something goes wrong.

Get more information

Want to know more about Professional Indemnity insurance? These articles from our blog may help you better understand this type of cover:

What does Professional Indemnity Insurance cover? – A more in-depth look at what a PI policy typically does (and does not) cover.

How the cost of Professional Indemnity insurance is calculated – There are many factors that can help determine how much you will pay for PI cover. Take a look at some of the most common in this article.

The difference between public liability and professional indemnity insurance – Public Liability and PI insurance are both common forms of cover that small businesses often consider. Learn more about what each covers and how they could help protect you and your clients.

Professional Indemnity Claims: when should I notify my insurer? – When you might need to contact your insurer, an explanation of your duty of disclosure, and tips for helping your PI claim go as smoothly as possible.

* As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.  The information contained on this web page is general only and should not be relied upon as advice.