Does professional indemnity insurance cover negligence?

What is professional indemnity insurance?

Professional indemnity insurance (PII) protects businesses who provide professional services like design, advice, specifications, and some data services.

If a client successfully sues you for financial losses caused as result of a professional service you provided, your insurance will pay the damages and legal fees.

Does that mean it covers negligence?

If you have made a mistake or been negligent when providing services like those above, your professional indemnity insurance will provide you with insurance protection.

It should also cover:

  • errors and omissions
  • loss of paperwork
  • breach of duty or confidence
  • infringement of copyright
  • intellectual property rights.

Do I really need professional indemnity insurance?

While you are not legally obliged to have this type of insurance, we always recommend that you have cover.

Unfortunately, even the smallest mistake can have serious financial consequences. It’s not just the cost of the actual mistake, but all the potential expenses that result from it, such as business interruption or restarting a project from scratch.

On top of these, there may also be significant legal costs which your business may have to pay.

If you don’t have insurance, these costs can affect your ability to do business, or even put your business at risk.

Does it matter what kind of business I have?

It doesn’t matter whether you are a smaller or a larger limited company – if you provide professional services, your business is potentially at risk if you don’t have cover.

Is it normal for clients to insist that I have cover?

It’s quite common, particularly for larger businesses, to make having cover a contractual requirement. If you don’t have it, you won’t be able to win certain contracts.

Similarly, your trade association may also require that you are insured to become a member. Not having it can therefore undermine your business’ credibility and reputation.