Professional Indemnity (PI) insurance is designed to help cover businesses that provide professional advice or service in the event of professional negligence claims. In other words, it helps provide cover if a client sues you alleging your service or advice caused them financial loss.

Having an allegation of professional negligence brought against you isn’t cheap. Unfortunately, once you’ve been named in a legal action, it can be difficult to navigate your way out of it without incurring at least some expenses to defend yourself. PI insurance can alleviate the financial stress of these situations by covering the legal costs to defend you, as well as compensation you might be required to pay. It can also help cover costs associated with investigating the claim and public relations in the event of a claim.

PI insurance is important for businesses which provide professional advice. This includes but is not limited to accountants; psychologists; architects; consultants and many more. For some professions, it is even mandatory, with a central regulating body setting the requirements and limits.

Architects, designers and engineers may need to consider Professional Indemnity Insurance in the event a client alleges their service or work caused them financial loss. Some examples of claims include:

• design errors
• failure to comply with council regulations
• non-compliance with safety standards
• insufficient details in design documents

While there is no governing body which stipulates PI insurance requirements of architects and designers, it is still an important cover to consider. Some clients may require that you hold PI insurance before engaging or working with you and if you wish to be part of certain industry associations or institutes, insurance may also be a requirement.

PI insurance also plays an important role in protecting the livelihoods of accountants in the event of professional negligence claims. As an accountant dealing with clients’ money, one small mistake can have a big impact for a client, and if a client does come forth with an allegation of professional negligence, the cost to you can also be considerable. Whether or not PI insurance is mandatory for accountants depends on the field of accounting, for example, for fields where you are required to be registered with a central body or association, there may be a requirement to hold PI insurance. It’s therefore important to check with your respective central governing body or institution to find out whether you are required to hold PI insurance.

Claims under PI insurance for accountants can come about as a result of issues such as:

• providing incorrect tax advice
• mistakes in calculations
• misleading information

PI insurance for psychologists is a mandatory requirement, as stipulated by the Australian Health Practitioners Regulation Agency(AHPRA. It is also a requirement for psychologists to register with AHPRA as a practitioner. For psychologists PI insurance helps cover claims where a client alleges your advice or treatment caused them some form of loss, or negatively impacted their life. There are a number of ways PI insurance claims can come about for psychologists, for example:

• failure to obtain informed consent
• providing service outside of your expertise
• breaching confidentiality

In addition to psychologists, PI insurance is a mandatory requirement for many other allied health professionals, including chiropractors, occupational therapists and physiotherapists.

IT professionals/consultants also may need to consider PI insuranceto cover them if a client alleges their service or advice caused them financial loss.Again, while there is no central governing body that mandates PI insurance for IT consultants, it may still be a requirement in order to work with certain clients or on certain projects. Some of the types of claims we see for IT consultants include:

• copyright breaches
• project non-completion
• lost data

PI insurance is also an important cover for real estate agents. In some states, PI insurance is a mandatory requirement for real estate professionals. Some of the types of claims which might come about for real estate agents professionals include:

• property mismanagement
• misrepresentation
• failing to appropriately investigate tenant history