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If you’re running a service- or advice-based business and you don’t yet have professional indemnity (PI) insurance, you need to read this article.
PI insurance may just seem like yet another expense, but it provides vital protection for service professionals in pretty much any sector.
Professional indemnity insurance explained
PI insurance exists because, as a qualified professional in Australia, you have a duty of care to your clients – and they have a legal right to rely on your expertise.
If something goes wrong and a client suffers a financial loss as a result of your advice or services, they can file a professional negligence claim against you. Depending on the nature of the claim, those losses could amount to tens or even hundreds of thousands of dollars – and on top of that you’ll have to pay legal costs, which can also quickly reach five figures.
Professional indemnity insurance covers both the damages you have to pay if a claim against you is upheld (up to the limit in your policy) and the cost of defending a negligence claim, whether or not it is successful. These risks are not covered by other types of business insurance.
If you’re still considering whether PI insurance is for you, here are three things you need to know:
- You can face a negligence claim when you haven’t been negligent
When you provide advice or a service, your work and its outcomes are intangible – so it can be difficult to establish exactly what impact you’ve had.
If a client decides they’re unhappy with your service, it can be very hard to prove that you delivered what you promised to the required standard. Unfortunately, even if you do everything right and never make a mistake, you could still be hit with legal action from a disgruntled client who thinks you’re responsible for their losses.
Many negligence claims are dismissed when they get to court – but in the meantime you could run up thousands of dollars in legal fees.
- You’re responsible for your employees’ mistakes
As an employer you can be held liable for the actions of everyone who works for you. Should one of your team make a costly error or omission, your business could take the hit.
Even the most experienced professional can make mistakes – and clients could file negligence claims over issues that aren’t even related to your core professional service, such as breach of confidentiality; loss, theft or destruction of data; or even libel or slander.
- You could lose business if you don’t have professional indemnity insurance
PI insurance isn’t just for you – it protects your customers too. If you don’t have adequate cover and something goes wrong, they’ll have no way to recover the losses that could bring their own business down.
That’s why many organisations have a policy that all service providers must have a minimum level of PI insurance in place. Without it, you could miss out on lucrative contracts.
Brought to you by David Green, professionalindemnityinsurance.com.au
