What Is Professional Indemnity Insurance?

Professional indemnity insurance is also known as professional liability insurance. The purpose of this insurance type is to provide compensation for damage or loss arising from negligence, omission, and errors on the part of the business or individual. Such incidents can lead to legal action and settlements. Therefore, this type of insurance is a must for professionals working in an increasingly litigious society. 

As a note, some professionals (e.g. architects and doctors) are required to have industry-specific professional indemnity insurance in order to practice. 

In this article, we discuss everything you need to know about professional indemnity insurance — including what it is, what it covers, and more. 

Let’s get started!

What Is Professional Indemnity Insurance? 

Professional indemnity insurance, also known as professional liability insurance, is a type of commercial insurance plan. This type of insurance provides compensation in the event that the business or individual is charged with negligence, errors, and omission. For this reason, professional indemnity insurance is also known as professional liability insurance or errors & omissions (E&O) insurance. 

Virtually all professional indemnity insurance policies are adjusted for the occupation or scope of services of the individual or business. But if you work with a trusted insurance broker like KASE Insurance, you will be able to personalize your professional indemnity insurance even more extensively to suit your needs and preferences.

Professional indemnity insurance is recommended for professionals and business firms who offer advice, consultation, and designs to their customers. In a later section, we’ll cover the various occupations that benefit from this type of insurance. But first, let’s get into a more detailed look at what professional indemnity insurance covers. 

What Does Professional Indemnity Insurance Cover? 

Covered Scenarios: Errors, Omission, & Negligence

Professional indemnity insurance is often linked to three words: errors, omission, and negligence. But what do these mean? Are they really any different from each other? 

Essentially, an “error” is a mistake on the part of the professional. An error becomes covered in professional indemnity insurance when it leads to damage or loss on the part of the client. An example of a professional error is giving the wrong advice or recommendation, leading to damage or loss.

Meanwhile, “omission” is defined as a more specific mistake that involves not doing an act that should have been done or failing to declare something that should have been declared — wherein the exclusion leads to damage or loss. An example of this is leaving out a crucial piece of information in a report which then led to an incident of loss. 

Lastly, we have negligence. Both errors and omissions can arise out of negligence. When legally defining a case of negligence, the incident must satisfy all of the following: 

• The existence of a legal duty to exercise reasonable care;
• A failure to exercise reasonable care;
• Physical harm by the negligent conduct;
• Physical harm in the form of actual damages; and
• Proximate cause, a showing that the harm is within the scope of liability. 

Though each of these three has its own definition, the lines may blur in real-life scenarios. For example, an omission is a type of error — yet not all errors are that of omission. Furthermore, both errors and omissions can arise out of negligence. The takeaway here is that these three key terms are there to set the scope for the types of incidents that professional indemnity insurance covers. These include the following: 

• Misstatements
• Misadvice
• Malpractice
• And other similar situations that lead to damage or loss. 

Professional Indemnity Insurance Coverage

After an incident of errors, omissions, or negligence, it is likely that the offended party would take legal action. Amidst such an unforeseen event, professional indemnity insurance will cover the legal fees and compensation up to the coverage limit of the policy.

What Is the Difference Between Professional Liability Insurance and General Liability Insurance? 

Numerous sources say that professional liability insurance and general liability insurance are differentiated by the fact that professional liability insurance does not cover compensation for bodily injury — and general liability insurance does. This is not always true. 

For example, if bodily injury is directly tied to professional negligence, errors, and omissions, then this will be accounted for in the settlement/compensation granted to the aggrieved party. Therefore, this is covered by professional indemnity insurance. 

Based on this, it’s clear that the real difference between professional liability insurance and general liability insurance is that the latter is not designed to cover losses/legal fees tied to professional errors and negligence. In addition, general liability insurance covers injuries within business premises, as well as advertising injuries — both of which are not typically included in professional liability insurance. 

At the end of the day, businesses are not meant to simply choose one over the other. In most cases, these two commercial insurance types actually complement each other. Here is an example that demonstrates how the two types work together: 

Do I Need Professional Indemnity Insurance? 

If you or your business gives professional advice, consultations, recommendations, and services, then professional indemnity insurance will serve you well. The following (and similar) lines of work are encouraged to get professional indemnity insurance: 

• Physicians
• Therapists and counsellors
• Accountants and actuaries
• Marketing consultants
• Mediators
• Architects and engineers
• Interior designers
• Lawyers and attorneys

Customized Professional Indemnity Insurance That You Can Count On 

KASE Insurance is an award-winning, Toronto-based insurance brokerage firm that specializes in putting together insurance plans that are customized for our clients’ needs. 

Whether you are an individual or business seeking professional indemnity insurance, we’re here to help. Not only will we put together a professional liability insurance that’s specialized for your line of work, but we can also adjust other aspects of the policy based on your preferences. 

Our team of experts is always ready to assist you in choosing the right insurance type, negotiating premiums, following up on claims, and everything in between.

Ready for the most hassle-free insurance experience yet? Contact us today or get started with a FREE quote!