Professional Indemnity
Insurance.

Professional indemnity insurance is designed to cover legal defence costs and compensation arising from claims that your business provided negligent advice, made an error or omission in your professional services or breached your professional duty to a client. It responds to financial loss suffered by a client, not physical injury or property damage. It is commonly arranged by businesses that provide advice, consulting, design, engineering, accounting, legal, financial, technology or other professional services.

Professional indemnity insurance does not typically cover claims arising from intentional wrongdoing, dishonesty or fraud. Bodily injury and property damage claims are generally addressed by public liability insurance rather than a PI policy. Claims notified after the policy period on a claims-made policy may not be covered unless a reporting extension is in place. Contractual liability beyond what the law would otherwise impose is commonly excluded. Conditions and exclusions vary by policy.

Professional indemnity insurance is mandatory for many licensed professions in Australia. Financial advisers, mortgage brokers, accountants, lawyers, engineers, architects, building designers, real estate agents, healthcare professionals and others may be required to hold cover as a condition of their professional licence or registration. Requirements vary by profession, state and professional body. If your business provides professional services, confirm your specific obligations with the relevant regulator or professional association.

Professional indemnity insurance is commonly held by financial advisers, accountants, lawyers, engineers, architects, building designers, surveyors, IT consultants, management consultants, HR consultants, marketing and communications agencies, healthcare and allied health practitioners, real estate agents, mortgage brokers and a wide range of other businesses that provide advice or specialist services. If your clients rely on your professional judgement, your business may have an exposure that professional indemnity cover is designed to address.

Professional indemnity insurance is typically written on a claims-made basis. This means the policy that responds to a claim is the one that is in force at the time the claim is first made against your business, not the policy in force when the work was done. If your policy lapses or is cancelled, claims arising from prior work may not be covered unless a run-off or extended reporting period is arranged. Maintaining continuous cover is important.

A retroactive date is the date from which prior work is covered under a claims-made professional indemnity policy. A claim arising from work done before the retroactive date is generally not covered, even if the claim is made during the current policy period. When arranging or switching professional indemnity cover, the retroactive date is an important factor to review to ensure past work remains covered. Get in touch and we can walk you through how this applies to your situation.

Run-off cover is professional indemnity insurance arranged after a business ceases trading or a professional retires, to cover claims that arise from prior work after the main policy has ended. Because PI insurance is claims-made, a claim made after the business has closed may not be covered by the previous policy if it has lapsed. Run-off cover provides continued protection for a period after the business or professional ceases providing services.

Professional indemnity insurance premiums vary significantly depending on the profession, annual fee income or revenue, the limit of indemnity required and the claims history. Lower risk professions with modest revenue can generally attract premiums from around $1,000 to $3,000 per year for standard limits. Higher risk professions, larger businesses or those with prior claims may pay substantially more. Every business is different. The only way to get an accurate figure is to talk through your specific situation with us.

Professional indemnity claims vary widely. A straightforward dispute over the quality of advice can result in legal costs and settlement amounts of tens of thousands of dollars. Complex claims involving large financial losses suffered by a client, class actions or claims against engineers, architects or financial advisers can run into millions of dollars. Legal defence costs alone can be significant even where the claim is ultimately unsuccessful.

The appropriate limit of indemnity depends on the nature of your professional services, the scale of your engagements and any minimum requirements set by professional bodies, regulators or your contracts. Common limits in the Australian market range from $1 million to $10 million, though higher limits are available. Many contracts and government tenders specify a minimum limit. Check your contracts, licence requirements and the size of your engagements to understand what applies to your situation.

Professional indemnity insurance responds to claims that a business caused a client financial loss through negligent advice or professional services. Public liability insurance responds to claims that a business caused a third party physical injury or property damage through its activities. The two covers address different risk scenarios. Businesses that provide professional services and also interact with clients, the public or work in client environments often carry both covers.

Professional indemnity insurance covers claims arising from the professional services a business provides to external clients. Management liability insurance covers claims arising from the internal management of a business, including actions by directors and officers, employment practices claims and statutory liabilities. They address fundamentally different exposures and are typically held separately, though some businesses hold both.

Insurers typically ask for a description of the professional services provided, annual fee income or revenue, the limit of indemnity required, the number of principals and employees, the retroactive date of existing cover, claims history for the past five years and any known circumstances that may give rise to a claim. When you get in touch, we will guide you through what we need and present your risk to our insurer panel.

Notify us as soon as possible, even if you believe the claim has no merit. Most claims-made policies require prompt notification as a condition of cover. Do not admit liability or make any payment to the claimant without first consulting us. Your insurer will typically appoint legal representation to assess and manage the claim. We will be actively involved throughout the process.

If you become aware of a circumstance that might reasonably lead to a claim, notify us promptly. Most professional indemnity policies allow notification of circumstances that may give rise to a claim during the policy period, with that notification preserving your rights under the current policy even if the actual claim is made later. Delaying notification can result in the claim falling outside the policy period and being uninsured.