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Professional Indemnity Insurance (PII) aims to protect people hired as knowledgeable experts against the expenses associated with a negligence lawsuit. It covers any damages which may be awarded as well as the costs incurred in conducting a legal defence. PII is an essential safety net for trained professionals operating in a litigious society.
A PII policy can be a valuable resource for anyone who runs their own business and provides their clients with professional services or advice. This includes financial advisors, brokers, fund managers, accountants, contractors, architects, advertising agents and software consultants. In professions where people are expected to use their specialist skills on behalf of a client, there is always the risk of a lawsuit if the client is dissatisfied.
Professionals are required to use 'reasonable skill and care' in all aspects of their business. If they are negligent in their duties, they are liable for any losses a client suffers as a result. A lawsuit may be filed on the grounds of misrepresentation, inaccurate advice, unfair dealing or breach of good faith.
Losing a lawsuit can be financially devastating and the legal expenses can be considerable even in a case where the defendant is not found liable for damages. With the right PII policy, a professional can ensure that their business won't lose all its assets due to the actions of one disgruntled customer.
PII policies cover professionals for damages awarded in a range of situations. Some examples are violation of patent or copyright, unauthorized use of information, loss or destruction of data, publication of trade secrets and libel or slander. Some policies cover a business against fraudulent or malicious acts performed by subcontractors or employees.
Most PII policies only provide coverage for lawsuit expenses incurred while the policy is live. To protect themselves, professionals with PII should arrange for a 'run off' period of cover after they retire or close their business. This is because a former client can sue at any time before the statute of limitations expires.
The cost of a PII policy varies according to the kind of business, the income it generates and the kinds of risks it involves. As with other types of insurance, more extensive cover and lower excess payments are associated with higher premiums.
Because no two professionals or businesses are the same, Professional Indemnity Insurance policies offer a range of different options. To ensure you get adequate coverage at a competitive price seek advice from an experienced broker and compare quotes from number of providers.
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