Professional indemnity insurance—essentials

The following Insurance & Reinsurance practice note provides comprehensive and up to date legal information covering:

  • Professional indemnity insurance—essentials
  • What is professional indemnity insurance?
  • How does professional indemnity insurance operate?
  • Professional indemnity insurance—level of cover
  • Limit of indemnity
  • Excess/deductible
  • Aggregation
  • Professional indemnity insurance—conditions and warranties
  • Professional indemnity insurance—insuring clauses
  • Common exclusions in professional indemnity insurance policies
  • More...

Professional indemnity insurance—essentials

What is professional indemnity insurance?

Professional indemnity insurance is a form of liability insurance. It provides a professional person or firm with an indemnity against claims or losses arising out of negligent acts, errors or omissions connected to the professional practice. Professional indemnity insurance typically also extends to the acts, errors and omissions of past employees.

There are over 100 professional bodies in the UK. Some professions, like solicitors, accountants and architects, are required to have professional indemnity cover in place by law. However, professional indemnity insurance should be held by any individual or business that provides advice, designs or services in a professional capacity. This may include anything from IT contractors to financial advisers and even Members of Parliament.

Professional indemnity insurance is typically designed to cover claims pursued by a professional’s clients arising out of professional advice given to that client. It does not generally cover claims arising out of the running or management of the professional practice itself. Claims of this nature may, however, be covered by a Directors’ and Officers’ insurance policy. Professional indemnity insurance does not cover claims arising out of defective workmanship (contrary to the expectations of some insureds).

For further information, see Practice Notes: Liability insurance and Directors' and officers' insurance policies.

How does professional indemnity insurance operate?

Professional indemnity policies operate on a ‘claims made’ basis. This means that the

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