What is professional indemnity insurance?

Professional Indemnity insurance protects your business against potential claims for professional mistakes, errors and/or omissions. It covers legal costs and expenses incurred in your defence, as well as any damages or costs awarded. if you are alleged to have provided inadequate advice, service or design that cause your client to lose money.

This can include claims of:

Negligence
Infringement of Intellectual Property Rights
Defamation
Breach of Confidentiality 

PI Insurance allows professionals to carry out their work with greater confidence and peace of mind

If you are alleged to have provided inadequate advice, services or designs to a client, Professional Indemnity Insurance provides cover for the legal costs and expenses in defending the claim, as well as compensation payable to your client to rectify the mistake.

The history of PI insurance

This type of insurance was created to provide much needed financial protection against the risks and personal losses to which professionals were heavily exposed. The origins of professional indemnity insurance go back to London in the 1700s. At that time, the established professions such as accountants, solicitors and architects traded with ‘unlimited liability’ as a guarantee of the quality of their work.
When they made a mistake, they would pay any remedial compensation to their client from their own pockets, limited only by the value of their assets. As such, they could literally ‘lose the shirt off their back’ if their mistake was significant enough. So the creation of insurance to protect against these losses was a much-needed solution.

Nowadays, the increasing reliance of businesses on the contracted services provided by many occupations has vastly increased the scope of the term ‘professional’, and a professional is regarded as any person or firm offering specialist advice or services. The risks are as significant as ever and mistakes can still lose a professional their business and their reputation without adequate professional indemnity insurance.