Professional Indemnity Insurance

The primary purpose of a professional indemnity policy is to protect the insured against the consequences of its liability to pay damages to third parties in respect of breaches of professional duty that it commits in the course of its profession.

However, it is now common for the policy to also include additional first party coverage such as loss of documents.

Professional indemnity business is written on a ‘claims made’ basis which means that cover must be in force when the claim arises and not necessarily when the work that led to the claim was carried out. This differs from a ‘losses occurring’ basis which means that the indemnity is provided in respect of actual damage which occurs during the policy period.

Particular attention must therefore be paid to ensure that full disclosure is made of any known circumstance which is likely to give rise to a claim of which the insured had knowledge prior to the policy period.
Most professional bodies such as the Royal Institute of Chartered Surveyors (RICS), Institute of Chartered Accountants in England and Wales (ICAEW), Royal Institute of British Architects (RIBA), Association for Consulting and Engineering (ACE) and The Law Society of England and Wales insist that their members have professional indemnity insurance in place and will often stipulate certain coverage requirements and approve participating insurers.