Professional Indemnity Insurance

Professional Indemnity Explained

Professional Indemnity Insurance provides essential financial protection for a wide range of professional advisers. In the event that a client suffers financial loss as a result of alleged neglect, error or omission professional indemnity insurance will meet the cost of defending claims and any damages payable.

Any person who gives advice, designs, or offers similar services in a professional capacity is seen by clients as an expert. In these times of high consumer awareness, clients will not hesitate to pursue a claim if they feel that they have received sub-standard service. The need for professional indemnity insurance has never been greater.

While some professional people see professional indemnity insurance as an expensive and unnecessary overhead, we know from experience that any professional can produce substantial claims. Court awards have risen sharply in recent years. Without insurance, the financial security of a business is threatened.

The following examples highlight the importance of Professional Indemnity Insurance:

A business wished to be known by a particular trade name. After consulting with company registration agents, it was told that there was no objection to its
chosen name. Proceedings were issued by a company with a similar name and €20,000 was paid by the company registration agents.

Detailers prepared structural drawings for the erection of steelwork. It was subsequently alleged that the drawings contained errors and €110,000 was
claimed for the costs of alteration and the resulting delays in construction.

An auctioneer sold property at auction over a number of years. It was alleged that the property was stolen and a claim for €250,000 was brought against the
Auctioneer.

It was alleged that consulting engineers were negligent in their design of waste heating boilers. A claim for €4million was brought for the cost of extra work and the resulting delays.

An estate agent missed the opportunity to carry out a rent review because of a defective rent review notice. The claim was settled for €50,000.

How much cover is required?

Individual professions can assess the amount of cover appropriate to their business. However in many cases this is determined by an authorising professional body which lays down the criteria and covers required often with minimum levels of indemnity and excesses. If in doubt you should check with your own authorising body, although as a
professional indemnity insurance broker, PIA Ltd generally will be able to advise you of the different requirements required for your particular profession.

We recommend that no insurance policy is taken out with a limit of less than €250,000. We will, however, provide a quotation for lower levels of indemnity if asked to do so. We are also able to provide cover up to a limit of €20,000,000 in most cases. Any professionals in doubt about the amount of cover they should take out should consult their legal advisers.

The following examples highlight the dangers of being under-insured.

Case 1: It was alleged that surveyors were negligent in their valuation of a property on behalf of a lender.
Loss: €1.5million Insurance: €1million Shortfall: €500,000

Case 2: A consulting engineer designed a roof which proved to be defective.
Loss: €350,000 Insurance: €100,000 Shortfall: €250,000

Case 3: A design consultant provided designs for tools to be used in manufacturing process. It was alleged that the designers were inaccurate.
Loss: €150,000 Insurance: €100,000 Shortfall: €50,000

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