If your client suffers financial loss because of your error, omission or negligent advice in the professional services you provide, they may seek compensation from your business. Defending these claims can be expensive, even where you have done nothing wrong.
Professional Indemnity insurance or PI insurance is designed to cover the costs of defending such claims and any compensation you are legally liable to pay, subject to the terms, conditions and exclusions of the policy.
A common misconception is that arranging PI insurance is just about finding the right premium, limit and wording. The right policy also protects your past work when you change insurers or renew. Professional Indemnity insurance is generally written on a claims-made and notified basis. For that reason, it is important to maintain continuous cover. Claims can arise years after the work was carried out, and a lapse in cover, a change to the retroactive date or a failure to notify a known circumstance can leave a business uninsured.
At DKG, we consider these issues when reviewing and arranging cover, especially when moving a client from one insurer to another. We also review the policy wording and exclusions to ensure the cover remains appropriate for the services the business provides.
Professional Indemnity insurance is designed to protect businesses against claims alleging that negligence, errors or omissions in their professional advice or services have caused financial loss to a third party such as a client of theirs. Cover can extend to the legal costs of defending a claim, even where liability is ultimately not established, as well as compensation the insured becomes legally liable to pay, subject to the policy terms, conditions and exclusions.
For certain professions, PI insurance is also a mandatory requirement imposed by legislation, regulatory authorities or professional bodies as a condition of providing their services.
Why it matters
For businesses and professionals providing advice, design or specialist services, the financial consequences of a claim can be significant. Even where an allegation of professional negligence is successfully defended, legal costs can be significant relative to the fees earned for the services in question.
Professional Indemnity insurance is also frequently a contractual requirement, with customers and principals requiring evidence of adequate cover as a condition of engagement.
An equally important consideration is the basis on which PI insurance responds to claims. PI policies are generally written on a claims-made and notified basis. This means that the policy in force when a claim is first made against the insured and notified to the insurer will ordinarily be the policy called upon to respond, rather than the policy held when the professional services were performed.
Policies may also provide cover for claims arising from circumstances first identified and notified during the period of insurance, subject to the relevant policy provisions.
Maintaining continuity of cover is important as claims may arise several years after the services were provided.
Allowing a policy to lapse, retiring or selling a business without considering the need for run-off cover, changing insurers without preserving the appropriate retroactive date, or failing to notify known circumstances can create significant gaps in protection for past work.
These considerations extend well beyond the premium and limit of indemnity. Careful attention to retroactive dates, prior-known-circumstances provisions, notification requirements and the availability of run-off cover is essential to ensuring that the insurance continues to provide the intended protection against historical professional liabilities.
What are the benefits of an appropriately placed PI policy?
- Provides cover for legal costs incurred in defending claims alleging professional negligence, errors or omissions, including claims that are ultimately unsuccessful, subject to the policy terms, conditions and limits.
- Covers civil liability arising from the insured’s professional services as described in the policy, including damages or compensation the insured becomes legally liable to pay, subject to the policy wording and applicable exclusions.
- Assists businesses in meeting contractual obligations and any regulatory or professional requirements to maintain PI insurance as a condition of appointment, licensing or professional membership.
- Provides protection against claims arising from professional services performed in previous years, subject to the applicable retroactive date, prior-known-circumstances provisions and claims notification requirements. Maintaining continuity of cover is important when changing insurers.
- Run-off insurance can provide continued protection for claims first made after retirement, the sale of a business or cessation of the business, where those claims arise from professional services performed before the relevant event. The scope and duration of cover depend on the agreed policy terms.
What can it cover?
Professional Indemnity insurance generally provides cover for claims or allegations of negligence, errors or omissions in the professional services specified in the policy. Cover typically includes legal defence costs and compensation or damages the insured becomes legally liable to pay. Depending on the policy wording, defence costs may form part of the limit of indemnity or be payable in addition to it.
PI insurance is generally written on a claims-made and notified basis, requiring claims to be first made against the insured and notified to the insurer during the policy period, subject to any applicable notification provisions. Claims arising from work undertaken in previous years may be covered, provided the work falls within the applicable retroactive date and is not otherwise excluded, including under any prior-known-circumstances provisions.
The extent of cover, available extensions and applicable exclusions vary between insurers and professions and are governed by the terms and conditions of the policy.
What usually is not covered?
Professional Indemnity policies generally contain exclusions or restrictions relating to:
- Known claims or circumstances before the policy commenced.
- Fraudulent, dishonest or criminal conduct, with provisions in some policies protecting innocent insured parties.
- Contractual liabilities that exceed those otherwise imposed by law, including certain warranties, guarantees and indemnities.
- Disputes involving unpaid fees, trading debts or the recovery of professional fees.
- Activities falling outside the professional services insured under the policy.
- Claims outside the policy’s territorial or jurisdictional limits.
- Bodily injury or property damage.
Exclusions vary between insurers and policy wordings and may be modified by specific extensions or endorsements.
How DKG supports you
At DKG, we take the time to understand your professional services, business activities, contractual obligations and potential liabilities. We review your claims history, existing insurance arrangements and any known circumstances that may give rise to a claim.
We assess your insurance requirements and identify contractual provisions, such as indemnities, warranties or uncapped liability, that may fall outside the scope of standard PI cover. Our advice is limited to the insurance implications of these provisions. Legal advice on contractual terms, obligations and enforceability should be sought from your solicitor.
We approach selected insurers and negotiate cover appropriate to your business, considering policy limits, excesses, defence costs, exclusions and any contractual or regulatory insurance requirements.
Maintaining continuity of cover, preserving retroactive dates when changing insurers and identifying potential gaps in protection for past work are considered. We also advise on run-off insurance where a business is approaching retirement, sale, merger or closure.
Throughout the policy period, we assist with the notification of claims and circumstances that may give rise to a claim. Timely and appropriate notification is important under claims-made and notified policies and may preserve cover for claims made in subsequent years, subject to the policy wording and applicable legislation.
Should a claim arise, we liaise with insurers and claims handlers, assist with the insurance claims process and advocate for our customers on coverage matters. Legal advice and the conduct of any defence sits with your solicitor.
For a review of your Professional Indemnity insurance, including the adequacy of your cover, continuity of protection, retroactive date and alignment with your contractual insurance requirements, contact Carien by email or call 1800 252 926.
Related services
Important note: The information provided is general advice only and has been prepared without taking into account your objectives, financial situation or needs. When making decisions about Professional Indemnity insurance, please consider the Product Disclosure Statement.
Placing a professional indemnity policy requires specialist expertise and an understanding of your services and their risks. Buying the cheapest off-the-shelf cover is a high-risk strategy. For example, you risk losing your retroactive date, an unnotified circumstance and the loss of cover for years of past work. A properly designed policy can address these gaps. Businesses evolve and cover must evolve with them. As a liability insurance broker, my role is to review, assess and advise on your policy so the cover stays aligned with your business, your risk appetite and what you choose to self-insure.
Please reach out to Carien Ahdar via email or call on 1800 252 926 to learn more about how we arrange Professional Indemnity insurance to support your contractual, regulatory and risk management requirements.
Choosing DKG Insurance Brokers means working with a brokerage that treats continuity of cover as a core part of every placement. Professional Indemnity insurance is generally written on a claims-made and notified basis. When we review and arrange cover, we check retroactive dates, prior-known-circumstances provisions and notification requirements.
We take the time to understand your professional services, business activities and contractual obligations. We review your claims history, existing insurance arrangements and known circumstances. We then approach selected insurers, negotiate cover appropriate to your business and review the policy wording and exclusions against the services you provide.
Some contracts and some professions require Professional Indemnity insurance. Your regulator or professional body sets any minimum requirements. We flag contractual provisions, such as indemnities, warranties or uncapped liability, where standard PI cover might not respond. Your solicitor then advises on the legal terms.
Whether you are renewing, changing insurers, or planning to retire, sell or close your business, DKG Insurance Brokers helps you protect cover for past work. We advise on run-off insurance, assist with notifying claims and circumstances and advocate for you on coverage matters if a claim arises.
Placing a professional indemnity policy requires specialist expertise and an understanding of your services and their risks. Buying the cheapest off-the-shelf cover is a high-risk strategy. For example, you risk losing your retroactive date, an unnotified circumstance and the loss of cover for years of past work. A properly designed policy can address these gaps. Businesses evolve and cover must evolve with them. As a liability insurance broker, my role is to review, assess and advise on your policy so the cover stays aligned with your business, your risk appetite and what you choose to self-insure.
Placing a professional indemnity policy requires specialist expertise and an understanding of your services and their risks. Buying the cheapest off-the-shelf cover is a high-risk strategy. For example, you risk losing your retroactive date, an unnotified circumstance and the loss of cover for years of past work. A properly designed policy can address these gaps. Businesses evolve and cover must evolve with them. As a liability insurance broker, my role is to review, assess and advise on your policy so the cover stays aligned with your business, your risk appetite and what you choose to self-insure.