Understanding Professional Indemnity Insurance:
What It May Cover for Your Business *

Professional indemnity insurance (PI insurance) is designed to help safeguard businesses that provide professional advice, consultancy, or services. Whether you are consultant, accountant, architect or a business charging a fee for advice, this type of insurance can play a role in managing risks of claims made against you for negligence or a breach of duty arising from acts, errors or omissions in providing your services. Understanding what professional indemnity insurance typically covers is important for ensuring your business is appropriately protected.

What Professional Indemnity Insurance Can Cover *

Professional Indemnity is designed to provide cover against claims arising

1. *Negligence Claims

Professional Indemnity insurance helps protect your business against claims for professional negligence due to an error or omission in your work. The policy can respond to cover the financial losses your negligence has caused your clients.

2. *Defamation

PI insurance may assist if you are accused of defamation, such as libel or slander, related to your professional activities.

3. *Breach of Duty

If your providing professional services and advice your business has a professional duty to your clients. Professional indemnity insurance can protect you from claims which arise if you have breached your professional duty to clients. For example, a tax agent may fail to lodge a tax return on time, resulting in penalties to their clients.

4. *Loss of Documents

In cases where you are responsible for the loss or damage of critical documents  PI insurance may cover the costs associated with recovering the materials or compensating the client.

5. Reputation Protection

Some professional indemnity policies can cover public relation expenses, incurred to protect your business’s reputation which could be suffering in the event the claim.

5. *Intellectual Property Infringement

If you are accused of unintentionally breaching copyright, trademark, patent or other intellectual property rights in the course of your work, PI insurance may help in providing cover for the costs of the IP breach.

What’s not covered by Professional Indemnity Insurance? *

Some common exclusions you should look out for on professional indemnity policies include:

• Cyber risk – most professional indemnity insurance policies have a cyber exclusion, unless a cyber extension of cover is granted.
• Bodily injury and third-party property damage
• Previously known claims or circumstances
• USA/Canada – most insurers exclude cover for the USA/Canada, unless you have requested this specific coverage. If you are offering services to the USA/Canada, it’s important that you tell your broker so they can arrange a professional indemnity policy that covers these activities.
• Directors and Officers Liability

*This list is not exhaustive, and you should talk to your dedicated broker.

Benefits of Professional Indemnity Insurance*

PI insurance may help protect your business’s reputation and ensure that legal expenses do not significantly disrupt your operations. It may also demonstrate to your clients that you are committed to delivering high-quality services and addressing any issues that arise professionally. 

Things to Keep in Mind*

• Policy Inclusions and Exclusions: Each policy is different, and it is important to review what is included and excluded from your cover. Consulting with an insurance broker may help clarify these details.
• Industry-Specific Risks: Different professions face varying risks. Ensure that the policy you choose aligns with the risks associated with your industry.

By understanding the role of professional indemnity insurance and tailoring it to your business’s needs, you may create a safety net that supports long-term success.

Disclaimer: The content of this blog article is intended for general informational purposes only and should not be considered as professional advice. While we strive to ensure accuracy, we make no guarantees about the completeness or reliability of the information. For guidance regarding what and how much business insurance cover you need, we recommend consulting with a business insurance broker. Any actions you take based on any information provided here are at your own discretion.