If you have never taken out a Smart Professional Indemnity Insurance policy, you are taking a huge risk. This is especially true if you a professional in the law, accounting, architecture or financial services industry. In these industries, you are required to carry the professional indemnity insurance by your professional bodies and regulators. In other industries like advertising, public relations and interior design, your trade organization may not require you to carry this form of insurance. However, many professionals in these and other industries take out the professional liability insurance policy to protect themselves. The truth is that anyone offering professional services should carry the professional liability insurance. This gives you an idea of just how important this insurance policy can be and why you need it.
Understanding Professional Indemnity Insurance
This form of insurance is also known as Professional Liability Insurance. It is a fast-growing sector in the commercial insurance market because it offers excellent cover to professionals in case the unexpected happens. What exactly is professional indemnity insurance? This is a form of insurance that covers professionals and professional firms in the event that these people make errors in the course their business. Professionals are not saints so it follows that people in the professional services industry can make errors sometimes. When this happens, these companies can be sued by clients. The professional indemnity insurance policy ensures that that the professional firm does not end up paying out big money to the client in cases where errors made in good faith led to loss or damage for the client. In effect, this policy covers errors or omissions, professional negligence, civil liabilities and breach of professional duties.
History of the Professional Indemnity Insurance Policy
We cannot discuss the professional indemnity insurance policy without looking at a bit of history. Back in the 1700s in London, established professions at the time were carried out by mainly by solicitors, architects and accountants. These professionals traded with a concept known as “unlimited liability”. This was a double-edged sword in the sense that it had both positive and negative sides. On the positive side, unlimited liability was a guarantee of the quality of the work these clients offered the client so it was a huge selling point. On the negative side, the concept of unlimited liability meant that the professionals would always pay a remedial compensation from their own pockets when they made mistakes. The compensation was only limited by the value of the assets of the professional in question. Now, the implication here is that these professionals could be sued out of business if they made mistakes. Clearly, this was not a sustainable practice, and this is where the professional indemnity insurance policy became necessary. In simple English, this policy helps people in the professional services industry in the sense that they don’t have to lose their shirts when they make mistakes in the course of offering professional services. Below are some categories of people who need this policy and how it protects them.
People in the healthcare industry definitely need a professional indemnity insurance policy. This is because, even at the best of times, mistakes happen in this industry. Now, let us take just one scenario to illustrate this point. A competent and experienced surgeon perform a routine surgical procedure like an appendectomy. Under normal circumstances, this should not present any complications. The surgery is successful, and the patient gets discharged. A few days later, the patient complains of severe pain in the abdomen. Another doctor examines the patient and discovers that the surgeon forgot a bit of cotton wool in the abdomen of the patient. Clearly, the patient has grounds to sue the surgeon because a very expensive mistake was made in this situation. Without a professional indemnity insurance policy in place, the patient can sue the surgeon out of existence. However, with this policy in place, the insurer will pay compensation to the patient and the doctor will continue to practice medicine and surgery, but he will be a presumably wiser and more careful professional.
Architects and Developers
Architects and property developers definitely need a professional indemnity insurance policy. This is because these experts are involved in the construction process, and they must observe the right safety standards. In cases where a cracks or building collapses as a result of a mistake made by any of the professionals involved in erecting the building, litigation will naturally follow. Again, let us take an example to make things clear. A reputable architect designs a high-rise building, and the project is completed within the stipulated time. However, after a few months, huge cracks appear on the walls of the building. Another expert assesses the building and reaches the conclusion that mistakes were made at the design and construction stage by both the architect and the structural engineers. Even if the building does not collapse, the fact that the professionals made serious mistakes means that the client has grounds for litigation. If the professionals in question don’t have a valid professional indemnity insurance policy, they will pay out big money to compensate the client. They might also be required by law to reconstruct the building the right way. The professional indemnity insurance will offer assistance to the experts involved here because the insurer will cover the cost of compensating the client for this expensive mistake.
Benefits of the Professional Indemnity Insurance Policy
Among other benefits, this policy offers the professional peace of mind. This means that the experts in question can do their jobs knowing that one mistake will not put them out of business. In addition, this insurance policy promotes sanity in many professions. In some professions, this insurance policy is compulsory. It follows that the regulatory bodies in these industries will ensure that their members take out the policy and do the right thing as they discharge their duties to the client. Finally, this insurance policy saves the policy holder from bankruptcy, and this is great for the economy. If you have not taken out this policy, do so today because it is in your best interest.