What is Professional Indemnity Insurance?

Professional Indemnity insurance (also known as PI insurance) is designed for professionals who provide advice or services to their customers and may even be a legal requirement for some professions. It can cover claims made against your business by customers or other third parties alleging that in performing your professional services, your business has caused them loss.

PI insurance can also help by providing cover for legal costs, settlements and court orders or judgments associated with claims against your business, provided they are covered by the policy.
 

What does Professional Indemnity typically not cover? 

As with most insurances, there are some circumstances which are not intended to be covered by Professional Indemnity Insurance (PI Insurance), such as:

• Third-party personal injury or property damage covered under Public or Product Liability Insurance. 
• Loss or damage which has not come about as a result of your advice or service
• Any assumed liability under a contract with a client (Contractual liability).

Who needs Professional Indemnity Insurance in Australia?  

Professional Indemnity insurance is a mandatory requirement for some professions in Australia, including some registered professions or as part of a professional membership. Even if PI insurance is not mandatory for your profession, your clients may want to see proof of your PI insurance, as this helps assure them that your business will be strong enough financially to deal with a worst-case scenario.

Professional Indemnity claims examples

Here are some claims examples from clients with insurance arranged through Aon to demonstrate how claims of professional negligence can come about, and how Professional Indemnity can help:


Claim Story : Jenny*

Jenny*, a massage therapist performed a massage on John*. John experienced an increase in pain immediately after the massage. He sued Jenny for compensation and rehab costs as he believed it was her massage technique that led to the increase in pain. John was successful in his claim against Jenny, and Jenny was required to pay John compensation. Jenny was also required to pay legal fees in defending herself. Professional Indemnity Insurance arranged for Jenny by Aon helped to cover the legal fees, as well as the compensation she had to pay.

Claim Story : Sam*

Sam* was an accountant who regularly prepared tax returns. In preparing Bruce’s* tax return, he made an incorrect tax deduction. This led to Bruce underpaying his tax for that year. Bruce eventually received a large fine from the tax office, and was also required to pay back the amount he’d underpaid. He successfully took legal action against Sam as it was his mistake that led to him receiving the fine and needing to backpay his tax. Sam held Professional Indemnity Insurance arranged through Aon, which helped cover the legal fees to defend his case, as well as the amount he was required to pay Bruce.