Negotiating the minefield
If you’re looking for professional indemnity insurance, it's likely you've come across – and had to decipher – proper grown-up words like ‘liability’, ‘duty of care’, ‘claims made’ and ‘negligence’.
Sorry about that.
Worse, what if you're one step further back than that? What if you haven't even got to grips with the basics yet? What is professional indemnity insurance you say? Sorry, no idea.
Well, don't worry, we're here to explain everything. Just sit back, relax, and – if it not's too unpleasant a thought – try to think of our knowledge as the water to your sponge.
Confused client: OK then PolicyBee. What's professional indemnity insurance?
PolicyBee: Good question. It’s all about negligence and protection.
CC: Righto. That's that one cleared up then. See you later!
PB: Er, no, hang on. There's a bit more to it than that.
CC: Oh, sorry. Go on.
PB: Well, it’s your negligence and your protection we’re talking about.
CC: Bit dramatic isn't it? Me? Negligent?
PB: 'Fraid so. In simple terms, in business, nobody's perfect and your negligence can be thought of as a mistake you make. Mistakes usually have some kind of fallout (for example, an unhappy client looking for payback) and that’s where the protection-for-you bit comes in.
We’ll take you as an example. You’re a professional and you give your clients specialist advice. Right?
PB: Well, if your client believes you’ve given them bad advice, not delivered what you said you would, or been careless with their confidential information, they can sue you for their losses caused by the alleged failure.
CC: I’m listening …
PB: If they do decide to sue you, that's when your professional indemnity insurance kicks in. The costs of defending you, and any damages awarded to your client are paid – up to the level of cover provided by your policy, of course.
You get the problem resolved and, with any luck, get to keep your client too.
CC: OK, great. So I can do whatever I want from now on then, safe in the knowledge that I’m protected.
PB: Hmm, not quite. Professional indemnity insurance is for genuine mistakes. Insurers tend to draw the line at paying claims caused by recklessness or promising something you can’t deliver. You still have to act responsibly.
CC: Fair enough. Thing is, I’ve got pretty robust terms and conditions and I only work when there’s a written contract in place. I don’t need professional indemnity insurance too do I?
PB: Sign of the times I’m afraid. These days, customers are inclined to sue first and ask questions later; you don’t actually need to have done anything wrong to find yourself at the sharp end of some enthusiastic finger-pointing. All the Ts & Cs in the world won't stop that happening.
And just a little enthusiastic finger-pointing is enough, by the way. If that happens – and you value your business and your reputation – you’ll need to defend yourself. Unfortunately that’s both expensive and time-consuming.
CC: But not if I have professional indemnity insurance …
PB: Exactly. The best bit about your policy is that it always looks out for you, regardless of whether you're at fault or not. In a sense, it does all the dirty work and leaves you to concentrate on other things. Like running your business.
CC: I like the sound of that. A bit like a big brother.
PB: Yes. Except without the irritating, fame-hungry wannabes.
CC: Not that kind of big brother.
PB: Oh I see what you mean. Yes, you've got it. As you were.insurance explainedmanaging risk