What is Professional Indemnity Insurance?

Worry is a simple five letter word which plagues most of us on a day by day basis, but for a busy professional, going out into the world of business on their own, suddenly this simple five letter word has a whole new meaning. There is already plenty for you to worry about, from keeping your business afloat to ensuring you pay your taxes on time.

One detail you shouldn’t have to worry about is the advice you offer or the services you provide, especially when there are insurances out there which are designed to alleviate this. One such insurance is professional indemnity insurance. But what on earth is this? And why do you need it? Let’s explore a little further:

Karen has worked hard for years, she has gained her degree in civil engineering, she worked through the ranks of an amazing civil engineering company, which she started from an apprentice, and has worked her way up to an associate position, now 8 years later she is proud to be going it alone. She works on designing drainage systems, from domestic to commercial projects. It’s not a glamorous job, but hey, someone has to do it!

Karen has been wondering how she would cope financially if one of her clients were to bring a claim to her door for wrongly designing a drainage scheme. Karen is a superstar designer, is this something she really needs to worry about? Yes! Is the most simple answer, the two main reasons being;

1. No matter how great she is, something can always go wrong, or she can always make a mistake.
2. Being great does not stop clients from accusing her of a mistake, even when these accusations are unfounded.

Professional indemnity insurance Stockport UK will basically cover Karen if one of her clients accuses her for any financial damage they have received. This could be due to Karen’s negligence, error, omission, misstatement or misrepresentation from a service or advice she has provided.

Karen has a friend called Leigh, Leigh wants some advice for a project she is starting to build at the bottom of her garden. Leigh wants a bathroom in it but wants a little advice first, so she turns to Karen for a quick bit of advice. Should Karen be worried? After all her friend isn’t paying for her advice, plus it’s her friend, surely she would have no legal right to bring a claim against her. Right? Wrong!

If something was to happen, for instance, Karen recommended the waste drain to be buried in the ground too close to the surface. This waste pipe cracked, and fixing this mistake would cost £2500. Karen’s advice now means Leigh has to outlay the financial damage which has occurred. Even if the advice was offered free of charge or given quickly, this doesn’t matter to a court. Karen is perceived to have expert knowledge, and if she is giving out advice no matter if it’s just a quick sentence, it’s free of charge or whether she is giving this advice to a friend or client, Karen owes them a duty of care.

Let’s flip this around, what if Leigh didn’t dig down far enough, as specified by Karen, can she still claim? Actually yes, as a claim can be brought to Karen, whether it is founded or not. Professional indemnity insurance brokers Stockport will help Karen to fight the claims brought against her.

Having professional indemnity insurance helps Karen to protect her business, this type of insurance policy covers the costs incurred in her defence including any court fees, and any fees for investigative work, as well as any damages or costs she would’ve had to outlay to an aggrieved client if she has been found negligent. The costs of this can run into the millions, without this cover in place Karen would be liable for those costs. So it’s vital, not only for peace of mind but for the safety of her business and herself to have this cover in place.

Some great tips which you could implement now, which would help during a liability claim are below:

• Think about everything which could cause a claim against you – from this you can create a disaster plan. This will allow you to be aware and implement good codes of practice throughout your business
• Have an amazing record keeping system – if a claim is brought against you, you will need this as evidence you have not done anything wrong. Implementing it now could save a lot of time in the future, plus it could also help a claim go in your favour, as you have the evidence as opposed to just the hearsay of what has happened.
• If you’re communicating in industry style jargon it is best not to, unless the person you are communicating with is of equal expert and experience level. Using such terminology is seen as ineffective communication and this alone can see organisations as negligible.
• Acknowledge all instructions in writing – if a client is asking you to add a screw hole here instead of there, send an email stating clearly and concisely what your understanding of the request is. This ensures you are both on the same page, it is also advisable to prompt a "yes this is correct" email back from your client.

There are plenty of reasons for taking out a professional indemnity insurance policy, some clients, such as government contracts require this cover, some clients will see this as a higher level of professionalism on your behalf. If this doesn’t prompt you to consider this type of policy, just ask yourself "if someone made a claim against me, could I not only afford to fight this in a court of law, could I also afford any damages awarded to the claimant" If the answer is no, then its best to cover yourself, for those just in case moments.

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