Miscellaneous professional indemnity insurance – who should buy it and why
As the term ‘professional’ expands to include an ever-broader range of services, provided in more diverse ways, there is an increasing number and variety of occupations that need to buy professional indemnity (PI) insurance.
What is PI insurance and do you need it?
PI insurance protects you if a dissatisfied customer decides to make a negligence claim against you if they’re not happy with your advice, design or service. The types of errors covered include professional negligence, dishonesty of employees, loss of documents, libel and slander, breach of intellectual property rights and breach of confidentiality.
In addition to the indemnity limit the insurance usually also pays the defence costs. The claimant needs to prove that they have suffered a financial loss as a result of your actions, but even if the claim isn’t successful the policy will cover your defence costs. The policy works by covering claims that are made while the policy is actually in force, even if the error causing it happened years ago. So policies should be kept up-to-date, otherwise there’s no protection against claims for work done in the past.
A Miscellaneous PI policy typically provides £1 million in cover, but the indemnity limit can be as low as £100,000 or up to £10 million + for larger businesses. In order to select the limit most appropriate for your business, think about what the financial loss could be to your customer should you make an error. One of the other considerations here is what limit of indemnity you may be contractually obliged to carry by your clients.
By bringing peace-of-mind to you and your clients, a Miscellaneous PI policy allows you to carry out work with confidence and makes you look more professional to customers.
Ask yourself these questions to determine if you need PI insurance:
- Do I offer advice or a professional service, handle client data or intellectual property?
- Does my professional body/regulator require that members hold PI insurance?
- Do my clients’ contracts stipulate I need a certain level of cover?
What is Miscellaneous PI insurance?
Insurers provide PI cover to businesses outside of the traditional professions such as agricultural consultants, bailiffs and interior designers. This is known as Miscellaneous PI insurance, but works in exactly the same way as cover would for “traditional” trades such as accountants or architects.
As anyone who offers advice or consultancy for a fee is deemed to be a professional, it covers a vast array of occupations. Our clients include botanists, personal shoppers, genealogists and life coaches, as well as more established Miscellaneous trades such as event organisers and recruitment consultants.
Different types of employment and the impact on PI insurance
The profile of the UK workforce has changed dramatically over the past ten years, driven by technological advances, changing demographics and shifting expectations of what it means to ‘go to work’.
It’s now estimated there are five million self-employed people in the UK. If you are thinking about setting up on your own, as a freelancer or SME, you need to consider your insurance needs from the start. PI claims can be complex and expensive, but having a policy enables you to carry on trading. You will need to buy it even if you’re home-based or work remotely from clients.
As well as the growth of self-employment, there’s also been a rise in employees with ‘side hustles’, to earn extra money outside of their regular jobs. It’s estimated that one in five British workers are likely to start a ‘side hustle’ in the next two years. Some of these hustles, such as becoming a social media consultant or a wedding photographer, will have PI risks associated with them, even if they are only spending a few hours on it every month.
Tokio Marine HCC’s Miscellaneous PI
At Tokio Marine HCC, we have underwritten PI policies for over 300 different professions. We understand a lot of niche businesses, the risks they face, and defended a weird and wonderful spectrum of claims against them. We have recently expanded our Miscellaneous PI wording so it now includes:
- Cover for breach of contractual duty to exercise reasonable skill and care
- Cover for a PR and/or crisis management consultant to avert or mitigate any damage to the insured’s reputation
- Cover for the cost of criminal proceedings, including legal costs and expenses
- Cover for court attendance
- Mitigation of loss cover
- Cover for sub-contractors
- Cover for indemnity to principals
- Mergers & acquisition cover
Miscellaneous Insurance Claims Examples
Incorrect advice regarding pesticides led to damaged crop. Claims are not uncommon. Some insurers worry about the pollution exposure.
Seized and disposed of goods belonging to an incorrect party. Firms with multiple claims are normally avoided.
Client is unhappy as the colour scheme and furnishings are not as they expected. Client insists the insured begin the project again using a different colour and furnishings.