What Is Professional Indemnity Insurance
Let’s start with Professional indemnity insurance, what is it? Professional indemnity insurance provides protection for claims that are against you for acts, errors, or omissions during provision of professional services. So the policy provides you with legal costs and damages if they’re awarded to a third-party.
You make an error, you stuff up, someone wants to claim compensation from you, a professional indemnity policy will help you with those costs and expenses. For example, design errors by engineers, or errors by your accountant, or incorrect or inadequate financial advice from your financial planner.
Do you know insurance protects the personal assets of directors and officers of a company?
Do you know it protects the personal assets of directors and officers for claims made against them for wrongful acts in their capacity as a director or officer of a company? And depending on the depth of cover, it can also provide protection for the company itself.
As a director of a company, under the Corporations Act, you have a duty to act with care and diligence, not use the information that you have access to for personal gain and act in the best interest of a company.
Directors have responsibilities to stakeholders, employees, and are subject to corporate governance and regulatory surveillance.
But do you know policy protects directors and officers from the financial cost of legal proceeding? And whether you are ultimately liable or not, these legal proceedings are costly and may run over several years.
Why Do I Need Directors & Officers Insurance?
Now you may be thinking, “Why do I need a D&O Policy? What has my personal assets got to do with the company? The company is a separate legal entity?” Yes, that is correct, but in certain circumstances, when a director breaches the law they can be personally liable. In addition to that, you may also be personally named in a lawsuit alongside the company.
D&O claims can be brought against public and private companies.
They can be brought by shareholders, whether individually or in a class-action. They can be brought by regulatory bodies, they can be brought by employees, stakeholders, creditors, for breach of OHNS Laws.
To sum it up, Professional Indemnity is all to do with the services and advice that you provide. A D&O Policy is all to do with how you carry out your duties as a Director Officer of the company.