Professional Indemnity – Contract and Tort Explained

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Professional Indemnity (PI) insurance cover protects you from the financial consequences of claims brought by clients or third parties who believe your actions have caused them injury, damage or financial loss.

PI claims generally come about in one of two ways.

Claims under contract

Most claims arise when a client alleges you have failed in your duty to act in their best interests in accordance with the terms of a contract – either real or assumed – and/or to exercise reasonable care and skill.

The fact that most PI claims are brought under contract makes it important that your contract terms with clients limit your liabilities as far as is commercially and legally possible.

Claims under tort

However, claims can also be brought for an alleged tort. A tort is a civil wrong that causes loss or harm, resulting in legal liability for the person who commits it. There is a wide variety of torts under common law, but by far the most relevant from a PI point of view is the tort of negligence.

You may be held negligent if you have failed in your duty to a client or third party not to cause injury or to cause damage to their property. For example, an architect owes a duty of care – beyond their contractual obligations – not only to the client but also to anyone else who may be adversely affected by flaws in the design.

Protecting your own interests

With the right advice you should be able to find Professional Indemnity insurance that protects your business from a full range of claims, however they may arise. The key thing is to review the scope of your activities and ensure you select a policy that cater to the true exposures you face.

Getting the right PI advice

A specialist broker will be able to advise you on what cover is available to meet your specific requirements. If you would like a quotation, please call us on 049-4332944, e-mail or complete our online enquiry form.

Disclaimer: The material contained is this article is for general information purposes only and does not constitute professional advice.

James Martin
James Martin
James Martin has 16 years of experience as a general insurance broker. He is a member of the Chartered Insurance Institute and has completed a Diploma in Corporate Finance.

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