Who needs professional indemnity insurance?

Professional indemnity insurance explained - a simple guide to PI insurance

Professional indemnity (PI) insurance protects you if a client decides to take legal action against you because of a mistake in your work. For example, if you provide advice to a client that leads them to experience a financial loss. Or, if you accidentally share a customer’s confidential information without their permission.

Even though most professionals strive to take the utmost care over their work, mistakes can happen. Plus, some professionals are vulnerable to more subjective disputes over quality or creative vision – like graphic designers and photographers. Either way, having a PI claim brought against you can lead to substantial  legal and compensation costs.

If you’re in a profession where this could happen, it’s a good idea to protect yourself with tailored professional indemnity insurance. If you’re wondering just exactly when is professional indemnity insurance required, or who should consider professional indemnity insurance, we’ll cover all you need to know in this guide.

Do I need professional indemnity insurance?

You should consider professional indemnity insurance if there’s any chance that a mistake – or perceived mistake – in your work could lead a client to take legal action against you.

When do you need professional indemnity insurance?

Whether you’re a contractor, freelancer or business owner, it’s worth considering professional indemnity insurance if you: 

• Provide an expert service, including advice and consultancy, to clients – for example, if a recommendation or information you give to a client leads them to suffer a financial loss, you could face a professional negligence claim.

 Provide a service that could lead to disputes over copyright – for example, if you accidentally use a copyrighted image without permission, a breach of copyright claim could be brought against you.

• Provide training, tuition or instruction – for example, if you make a mistake when tutoring a student and they fail an exam because of this, you could face a professional negligence claim. Or, if someone is injured because of instructions you give during a fitness class, they could seek compensation.

• Handle confidential information – for example, if you accidentally share a client’s confidential information without their permission, a breach of confidentiality claim could be brought against you. 

Which professions benefit from professional indemnity insurance?

The types of claims PI insurance covers can be varied in nature – which means there are many professions and sectors that would benefit from professional indemnity protection. These include:

• Consultants – such as business and management consultants, human resources consultants, and operations consultants.
• Contractors – such as engineering contractors, IT contractors, and trades contractors.
• Creative and marketing professionals – such as web designers, graphic designers, and photographers/videographers.
• Teachers and instructors – such as private tutors, first aid trainers, and fitness instructors.
• Financial services – such as accountants, mortgage brokers, loan brokers, and financial advisors.
• Expert services – such as property surveyors, architects, and design services.
• Media professionals – such as journalists and media companies.
• Healthcare professionals – such as occupational therapists, physiotherapists and psychotherapists.
• Tradespeople – such as joiners, electricians, plumbers and kitchen fitters

This list isn't exhaustive. In reality, there are many professionals that may be vulnerable to these types of claims. Whatever your profession, if you feel there’s a chance a client could bring a legal claim against you because of a mistake in your work – it’s worth getting protection.

Is professional indemnity insurance mandatory?

There’s no legal requirement to have professional indemnity insurance. But there are certain cases where you won’t be able to work without it. For example, some industry regulators require you to have PI cover.

Professionals that may be required to have professional indemnity insurance by their professional regulators include:

• Accountants
• Architects
• Chartered surveyors
• Financial advisors
• Solicitors
• Certain healthcare professionals

There are also scenarios where a client may require you to have PI cover before agreeing to work with you. For example, if you’re a self-employed architectural consultant, a client might ask if you’re covered before finalising a contract with you. Or, if you own a creative agency, clients may require you to have PI cover before undertaking a major website redesign project.

Ultimately, though, it’s important to think about your own exposure to certain risks as a professional. Even if a client doesn’t require you to have PI insurance, you should consider what you’d do if you did end up facing a costly legal claim. If there’s any risk at all involved in your profession, it’s worth considering taking out the appropriate precautions to protect yourself – regardless of regulator or client requirements.

Examples of when professional indemnity insurance is important

Just when is professional indemnity insurance needed? If you’re still unsure about whether you need professional indemnity insurance, it might help to look through some specific examples of when it could make a difference. Below are some scenarios where professional indemnity cover would be crucial in protecting a professional against costly legal claims:

An employee accidentally shares a client’s confidential information
An employee at a boutique marketing agency accidentally sends out an email with an attachment that reveals a client’s upcoming marketing plans to potential competitors. The client feels their business has been jeopardised as competitors now know about their confidential marketing tactics – meaning they’ve lost their edge.

A data breach/professional negligence claim is brought against the marketing agency. They want compensation for both the money they’ve spent on the leaked marketing campaign, and the losses they expect to incur as a result of being at a disadvantage to their competitor.

A freelancer uses an image they don’t have the rights to
A freelancer who specialises in graphic design grabs an image from a stock photography site to use on their website. Although they hadn’t realised, it turns out that the image was copyrighted – which was explained in the small print of the website.

The owner of the image discovers it’s been used without permission, and brings a breach of copyright claim against the freelancer. They want to be paid the appropriate licence fee for the amount of time the image was used, as well as some compensation for their photo having been used without credit.

A personal trainer forgets to ask a client about previous injuries
A personal trainer starts working with a new client, but forgets to ask them about any previous injuries before devising a training plan. While training, the client exacerbates an old injury because their exercises weren’t tailored to take the injury into account.

They bring a claim of professional negligence against the personal trainer. They've had to take time off work, spend time recovering, and pay for private physiotherapy sessions – so they want compensation.

How professional indemnity insurance claims work

Professional indemnity insurance covers a variety of eventualities, like the scenarios we’ve outlined above. It can be tailored to the specific risks involved in your profession. You decide the level of cover you want to take out – then, you’re covered for that amount if you need to make a claim.

When it comes to making a claim, your first port of call is to contact your insurance provider. At this point, you should let them know in as much detail as possible about the claim being brought against you. They’ll then be able to offer advice, and help you decide next steps. If the claim is successful, your insurer will pay for costs you’ve incurred as a result of the claim brought against you (up to your limit of cover).

To find out more about what is and isn’t covered by professional indemnity insurance, and how to make a claim, head to our guide: Professional indemnity insurance explained.

Deciding if you need professional indemnity insurance

Whether or not you need professional indemnity insurance depends on a range of factors. Your industry regulator may require you to have it, as well as some clients. Most importantly, though, you should treat PI cover as priority if there’s any risk a client could bring a claim against you because of a mistake in your work.

If you’re worried about this, read more on our help and guidance section, or contact us to discuss your options.   

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