Professional Indemnity Explained - Negligence only or Civil Liability

Professional Indemnity Explained - Negligence only or Civil Liability

The PI Cover small print that you really need to know!

When you are reviewing Professional Indemnity Insurance, as well as gaining an understanding of the critical fundamentals, it's essential to take time to explore some of the specifics around the cover itself and why quotations which look identical on the surface, may, in fact, be very different!

As a predominately E-based business, we would struggle to criticise a medium which is driving consumer knowledge, saving time and helping companies to communicate.

However, there is a genuine temptation to sell purely on price, which is all well and good if the product is identical.

Still, in the case of PI Insurance, there are several key points to check to ensure that a supposedly cheap Professional Indemnity quote is adequately protecting your business.

The basis of cover: Negligence only (Errors and omissions) or full civil liability cover

At the very heart of any insurance policy is the basis of cover, in other words, what type of claim the insurance company will pay out for.  

Some basic PI policies are what we call “Negligence Only”, in other words, the insurance company will indemnify you against claims for Professional Negligence.

The policy will indemnify you against losses laid out in the policy wording, but in the main, the claim will need to prove the following three points:

  • You owe a duty of care to the claimant (usually your client)
  • You’ve breached your duty of care
  • The said breach has caused loss to the claimant

A full civil liability policy flips this process on its head. It provides cover for all claims made against you which are not explicitly excluded, much wider cover and genuine peace of mind against a multitude of eventualities.  

Also, a full civil liability policy will often extend to cover to include:

  • Defamation (libel and slander)
  • Loss of documents or data (privacy)
  • copyright infringement or intellectual property disputes

What’s the problem you may think? Well, some only find out when they try to make a claim.

A Negligence Only policy is what is known legally as a strict liability policy.

In other words, the claimant needs to prove that you were directly negligent for the policy to respond and if the claimant still believes that you are responsible, they could continue to pursue you for their losses.  

Typically this might include a breach of contract or even a statement made in your sales pitch.  

Imagine the IT consultant recommending a new system which will save 10 FTE – the client only achieves a saving of 4 FTE and pursues the consultant for the cost of the system and financial implications, even though, in the eyes of the law, the new system has been delivered on a satisfactory basis.

Your Professional Indemnity Insurer – A Business Partner or a position of last resort?

Very often, negligence only PI policies will wait for the formal legal claim to be made against you before the process of engaging and defending your position (if appropriate) begins.  

As a full civil liability policy offers much broader protection, the insurer tends to take a much more consultative approach.  This is particularly prevalent in the area of loss mitigation.

For example, a magazine publication went to print 10,000 copies of their magazine, only to realise that the advert from one of their key clients had not been updated to the new copy provided.  

They contacted their insurer and explained the error. Rather than potentially facing a significant claim for damages, the insurer agreed to pay for a print re-run with the correct copy.

Fantastic service, a thrilled client and a potential claimant who was never aware of the loss!

So what you’re saying is I need to buy full civil liability cover?

Not necessarily, for some small companies where exposure is limited by contract, for example, you only work for a single company, you may find that negligence only cover is perfectly adequate, and the additional protection is superfluous.  

We recommend that you compare the different quotation options and your specific requirements in detail - you will then be informed to make the PI cover purchase that is right for your business.

Get a FREE Business Insurance Review

When it comes to Errors and Omissions, you must get the right advice. Why not get a free business review with one of our Insync Insurance team?

We can compare professional indemnity insurance from the UK's leading insurers in minutes as well as ensuring you have the correct protection for your business.

Call us on 0330 1240730 to find out more, or book a slot via our website at a time that suits YOUR business.