Professional Indemnity Insurance as a Statutory Requirement
Professional Indemnity Insurance can be a statutory requirement for some professions and it can be a contractual requirement for some businesses. It is usually a requirement where advice is given to consumers and it serves as a consumer protection mechanism.
For heavily regulated industries, such as the financial services industry, it is a requirement, it’s usually a requirement in order to obtain say, a Australian Financial Services License or a Credit License.
Which Professions Are Required To Have Professional Indemnity Insurance?
Financial service providers such as insurance brokers, financial planners, fund managers, they all need to show a proof of PI insurance in order to satisfy their licensing requirements. Lawyers and doctors are also required to hold professional indemnity.
This is usually in the form of medical malpractice insurance.
Professional Indemnity can be a contractual requirement, it is usually a requirement when you are providing goods and services on behalf of a another company. The company that you’re contracting to doesn’t want to be responsible for your negligence, so they usually insist on a PI policy so that you’re in a position to defend yourself.
One of the things that you need to be careful of when getting insurance to satisfy a contractual requirement is, you need to understand the liabilities that you’re accepting under the contract.
Who Can Be Sued?
Most insurance policies don’t cover contractual liability, whether it’s a legal requirement or not, PI Insurance is a great risk management tool for your business.
Anyone who owns a business is at risk of being sued. Doesn’t matter what industry you’re in, mistakes happen, things beyond your control happen, you want to be in the best position to protect yourself and your personal assets.
Lawsuits are expensive and can take years to resolve. Unless you have deep pockets, lack of savings can drain your business of cash and your personal finances and inturn your livelihood. That’s just legal costs. If you are found to be at fault or negligent you’ll have to pay damages to that third-party and their legal costs. And don’t forget sometimes you don’t need to have done something wrong to be found at fault.
Sometimes you may have not have done anything wrong but commercial settlements are made on a no liability [inaudible] basis.
Professional Indemnity Insurance Lawyers
Aside from the costs, you need a lawyer that specializes in insurance law and PI claims. Your family lawyer is unlikely to specialize in insurance law, your mate’s mate’s lawyer is unlikely to specialize in insurance also. You need to find the right lawyer to give you the right advice, to handle the claim as best as possible.
To wrap it up, don’t just jump online and find the cheapest PI policy that you can find just to satisfy legal or contractual requirement. It’s important that you get right cover and the right advice so you get the maximum protection in the event of a claim.