What is Professional Indemnity insurance?

Professional Indemnity (PI) insurance covers legal costs and expenses incurred in your defence, as well as any costs that may be awarded if you are alleged to have provided inadequate advice, services or designs that cause your client to lose money.

Many professions need to have PI as part of their respective industry body’s regulatory requirements. Even if you are not obliged to have PI insurance, without it, you could be liable for hefty legal fees and/or compensation payments.

Cover areas Claims examples
  • Breach of confidentiality
  • Breach of intellectual property rights
  • Dishonesty
  • Libel and slander
  • Loss of documents

Professional negligence of the policyholder and their designers, consultants and subcontractors

  • The insured was employed to design and manufacture a number of tanks, which later leaked and failed. While there was no damage to the tank, the insured carried out an inspection where it noted that there were signs of stress (which is caused by excess pressure). In addition the ‘base’ (concrete) may not have been level, which caused more pressure on one side. This matter was fully defended without any claim payment being made – Settled £nil/Costs £8,000.
  • The insured was instructed by the main contractor to design, supply and construct the timber frame for a new primary school. The claim concerned the structural failure of the school’s floors/ceilings, leading to its closure, remedial works and associated costs. The cause was originally considered to be the failure of the glue product used rather than the insured’s specification. However, following the disclosure of new expert evidence, the claim was amended to include design defects – Settled £110,000/ Costs £15,000.
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