Professionals have a duty to offer ‘reasonable skill and care’, as part of the service they provide. If they fail to exercise this duty and are subsequently proven to be negligent and if any loss is caused, they may be liable for the losses incurred by their customers or other third party. No matter how good professionals are at their jobs or how good their attention is on detail , there is always the potential for small mistakes to be made. Proving innocence may cost and it pays to be protected.
Professional indemnity insurance offers indemnification to professionals who provide advice or services to their customers against legal liabilities arising from acts, omissions or breaches in the course of discharge of their professional duties. In simple terms, this means that if a professional does something or omits to do something in the course of his/her work, and the principal suffers injury or financial loss as a result, professional indemnity insurance responds. This policy is also known as Errors& Omissions (E&O) Liability insurance policy.
Professional liability insurance policies are generally issued on claims-made basis, meaning that the policy only covers claims made during the policy period. Claims which may relate to incidents occurring before the coverage was active may not be covered, although some policies may have a retroactive date, such that claims made during the policy period but which relate to an incident after the retroactive date (where the retroactive date is earlier than the inception date of the policy) are covered.
Common claims that professional liability insurance covers include negligence, misrepresentation, violation of good faith and inaccurate advice.
An indicative list of examples is given below: