Professional Indemnity Insurance

This policy is designed for professionals and firms which covers them in the event of certain errors of judgement made during the course of their professional work. Policies cover such things as professional negligence, errors or omissions, breaches of professional duty or conduct and civil liabilities.

This insurance enables professionals to work without the fear that they may be sued by a client or a third party for injury or damage that may be caused to them as a result of the professional services given. In short, it allows professionals to carry out their work with greater confidence and peace of mind.

Need For Professional Indemnity Insurance:-

Regardless of the experience that a firm may have, there is always a possibility that Professionals or their team members could make a mistake. Professional Indemnity Insurance may be required by Professionals if they

• Handle Data belonging to a client or business: e.g., a Chartered Accountant

• Are responsible for client’s intellectual property: e.g., an IT Firm

• Advice or guide clients: e.g., a Structural or Design Engineer, a Legal Advisor

• Provide professional services, e.g.: a Doctor or a Surgeon

No matter how large or small an entity providing the professional service, without a professional indemnity cover the financial position of the service provider could become vulnerable if a claim is brought against them.

Difference between Professional Indemnity and Commercial General Liability Insurance:-

A typical Commercial General Liability insurance policy will only respond to a bodily injury,property damage, personal injury or advertising injury claim. Other forms of Liability insurance covers employers, public and product liability.

But professional services can give rise to legal claims without causing any bodily injury,property damage etc. covered by other Liability policies. Common claims of professional liability insurance arise from negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice.

Examples: Professional Indemnity Policies on Claim Made Basis – Explained Two concepts that have to be understood here is the ‘Policy period’ and ‘Period of Insurance’. Period of Insurance is the number of years a policy was in existence without break; this may be with the same insurer or different insurers. Policy period is the particular period that a policy was in force.

Professional liability insurance policies are generally issued on a claims-made basis, meaning that the policy only covers claims made during the policy period.

More specifically a typical policy will provide indemnity to the insured against loss arising from any claim or claims made during the policy period by reason of any covered error,omission or negligent act committed in the conduct of the insured’s professional business during the policy period.

Some policies may have a retroactive date; this covers claims made during the ‘policy period’ but which relate to an incident (so far not known to the insured or not notified) that occurred during an uninterrupted ‘period of insurance’ and covered within the retroactive period mentioned in the policy

Who Can Take the Policy?

The following group of professionals can avail professional indemnity insurance:

• Medical practitioners such as physicians, surgeons, cardiologists, pathologists,Anesthetists etc.

• Engineers, architects, contractors and interior decorators

• Medical establishments such as hospitals and nursing homes

• Lawyers, Advocates, solicitors and counsels Chartered accountants, management consultants and financial accountants

Professional Indemnity Policy Coverage and Extensions Insuring Clause: Breach of Professional Duties

Insurers agree to indemnify the Insured against any Claim for civil liability arising from a breach of professional duty while in the conduct of the Professional Business first made against the Insured during the Period of Insurance. It covers Professional Liability arising

• Failure to perform a professional service

• Loss of document

• Joint Ventures

• Vicarious Liability cover

• Defense costs

Extensions:

• Intellectual Property rights

• Consultants, Contractors & Agents (Vicarious Liability)

• Costs of Official Inquiries

• Extended Reporting Period- when policy is not renewed

• Joint Ventures

• Fidelity

• Previous Business (Optional)

• Heirs, Estates and Legal Representatives

• Loss Mitigation & Rectification

• Principal’s Indemnity

• Reputation Protection Expenses

• Contractual Liability

• Administrators and Executors

• Advancement of Defense Cost

• Automatic Inclusion of New Subsidiaries:

• Continuous Cover

• Court Attendance

• Domestic Partners

• Emergency Costs Advancement

• External Dispute Resolution

• Non-Renewal Discovery Periods

• Authorised Representatives

• Breach of Privacy

• Employment Practices Liability

General Exclusions:

• Criminal Act

• Intentional and Wilful Acts

• Loss of goodwill and loss of market

• Delay in delivery

• Criminal, Malicious and dishonest acts except covered as an extensions.

• Insolvency and Bankruptcy

• Claim of group company/associate Company

• Anti-trust claims

• Known losses and pending mitigations

• Long term policy (policy more than 12 months)

• Fines & Penalties & Punitive damages

• Governmental & Regulatory Orders

• Policies other than claims made & unlimited liability

Underwriting and Rating Considerations

•Duly filled in, stamped and signed Proposal Form

•Individual/Partners/Company Profile

•Copy of Contract for project specific policy

•Total turnover/revenue for last 3 years

•Past Losses

Policy premium dependent on following factors

• Indemnity limits for any one Accident and Any one Year to be chosen by client in one of the following ratios: - 1:1, 1:2, 1:3, and 1:4.

• Annual fees / revenue of insured

• Jurisdiction: India, USA/Canada, Other than USA/Canada

• Extensions and sub limits required

• Period of cover- e.g. Long term Project PI for contractors.

Minimum Excess under PI & E&O Insurance

• 0.25% on AOO limit subject to minimum of Rs 25000 and maximum of Rs 10,00,000 in India.

• 0.50% of AOO limit subject to minimum of Rs 1,00,000 and maximum of Rs 15,00,000 ROW excluding USA/Canada

• 1%of AOO limit subject to minimum of Rs 5, 00,000 maximum of Rs 50, 00,000 for each and every loss in USA / Canada.

The following are the common types of policies available:

1. Doctors and Medical Practitioners: Schedule of Rates

Category

Rate Per Mille on AOY Limits

 

1:1

1:2

1:3

1:4

 

Physicians without dispensing and other facilities, General Pathologist, Radiologist

0.50

0.40

0.35

0.30

Specialists / Consulting Physician (Non-surgical)

1.00

0.80

0.70

0.60

Surgeons (excluding specialists in Plastic Surgery) Lithotripsy, Dentists & Similar extra Corporal methods of treatment would fall within this category

2.00

1.60

1.40

1.20

Surgeons (Plastic Surgery) and Anaesthetists

3.00

2.40

2.10

1.80

Minimum Premium Rs. 100/-

• No Compulsory or Voluntary Deductibles are applicable.

• Whenever Doctors wish to cover unqualified staff working with them, the same may be allowed by collecting additional premium of 7.5% of the indemnity premium.

• Wherever multiple professional specialisations are involved, then the rate applicable will be that of the specialisation which attracts the higher premium rates.