In present days courts are very consumer friendly and in lots of cases, they have given full right to patients to sue against the doctors for their carelessness & unethical practices. In many cases, court has passed orders for doctors & hospitals to pay for their mistakes. That is the power of Professional Indemnity Insurance.
If a professional is found guilty of providing wrong advice or cheated client, professional indemnity insurance helps in defending the claim by providing legal cost & expenses, also monetary benefits to their clients to rectify the mistake.
Professional Liability Insurance (PLI) is also known as Professional Indemnity Insurance. It’s very popular in theUS with thename of Error & Omission (E&O) and is a type of liability insurance which provides help in protecting professional service & advise.
Professional Liability Insurance Planning (PLI) can be taken in many forms depending upon the profession, mainly in medical & legal, and may become necessary under contract by other businesses that are the beneficiaries of the advice or service.
Every individual is different from the other & some individuals always take arisk in their profession that leads to liability if an error in service takes place. Lots of people work on theprevious experience of professions. If a professional person makes a mistake, the person who is following his advice will be impacted. People are very well educated nowadays& they know how to take benefit of court if some professional makes a mistake.
What is Professional Indemnity Cover?
It’s very useful policy for the professionals. If the policy is continuously renewed from the date of inception, then it also provides the benefit of aclaim for the earlier period.
This policy can be issued to agroup of people also who are in thesame profession. Group discount benefit is also available depending upon the number of members.
Professional Indemnity Covers thewhole amount for which a professional is legally liable to pay to thethirdparty as a damage against any error and mistake by the insured professional while providing the professional service.
This cover also provides the legal cost & expenses of defense, but prior consent of insurance company is required subject to the overall cover provided by the company.
This policy will not cover any type of criminal act or violation of law by the professional while rendering the service to thethird party. It only covers civil liability claims.
In this cover, sum insured is called as Limit of Liability. The summust be countable. In most insurance policies normally, claim amount is known but in Professional Indemnity Cover, claim amount is unknown.
Insurance company sets the limit of liability, up to which they will bear the losses. Excess to that will
Professional Indemnity Cover starts from 0.30% to 1% of the insured amount. Amount of premium is depending on manyfactors i.e. Income, Limit, Professional Experience,and Jurisdiction.
Following are the professionals which are covered under this plan:
- Interior Decorators, Architects & Engineers.
- Advocates, Lawyers, Solicitors & Counselors.
- Doctors & Medical Practitioners like Surgeons, Cardiologist, Physician & Neurologist.
- Designers, Event Planners, Small Business.
- Chartered Accountants, Financial Accountants & Management Consultants.
- It also covers the legal liability of Medical Establishment, such as Hospitals & Nursing Homes as an error committed by any professional or experienced assistant appointed by the Medical Establishment.
This plan does not cover professionals from the financialindustry, but financial advisors can take this policy under the category of consultants.
What is covered under the policy
Professional Indemnity Covers the financial losses due to error or omission by the professional while rendering the service for which he/she was hired.
There is one condition to this cover: that third party suffered bodily injury or property damage.
This plan provides safety against compensation arising due to Negligence, Act, Error or Carelessness while rendering the professional service. Defense Cost is also covered for professionals like Chartered Accountants, Architects, Engineers, Advocates, Lawyers, Designers, Doctors and Medical Establishments to protect their business interest from the losses due to error or act by the appointed professionals.
Professional Indemnity Insurance covers professionals from the legal claims arising due to following covered threats:
- A business which is done by any person who is appointed by the insured professional, by or on behalf of said firm, any business conducted in their professional capacity.
- Payment of Fees, Expenses and Defense Cost as per Indian Jurisdiction.
- All professionals in thebusiness of a firm, if they are covered.
- Legal liability arising due to bodily injury or death due to abreach of professional duty by the insured professional.
How to select the sum insured
In this cover, sum insured is called as Limit of Indemnity. This limit is fixed per accident and per policy period which is called Any One Accident (AOA) LIMIT and ANY ONE YEAR (AOY) limit appropriately.
One can choose the ratio of AOA limit to AOY limit from the following:
AOA limit is maximum amount payable for each accident. It should be fixed based on nature of the activity of the insured and the maximum persons that could be affected and maximum property damage that can occur, in the worst accident scenario. Any One Accident limit is cramped to 25% to Any One Year limit in Professional Indemnity Insurance for professionals like Interior Decorators, Lawyers, Advocates, Chartered Accountants, Solicitors, Management Consolers, Financial Accountants & Engineers.
In theoccurrence of any event where liability claim is arising, theinsurance company must be informed immediately. On receipt of any legal notice or summon, it should also be informed by theinsurance company. So that insurance company can arrange a defense option.
AOA limit selected considered as the maximum amount payable including the defense cost. AOY limit will get automatically reduced by the claim amount of any one accident. Any number of such claims made during the policy period will be covered subjects to the total indemnity not exceeding the AOY limit.
What does Professional Indemnity Insurance not cover
The insurance does not cover any claims made for the following acts:
- Deliberate, willful or intentional noncompliance withany statutory provision.
- Non-Compliance with technical standards commonly observed in professional practice laid down by law or regulated by official bodies.
- Fines, Penalties, Punitive or exemplary damages.
- Professional services rendered by the insured prior to the Retroactive Date in the Schedule. Deliberate conscious or intentional disregard of the insured’s technical or administrative management of the need to take all reasonable steps to prevent claims.
- Any dishonest, fraudulent criminal or malicious act or omission.
- Loss of pure financial nature such as loss of goodwill or loss of market.
- Arising out of all personal injuries such as Libel, Slander, False Arrest, Wrongful Eviction, Wrongful Detention, Defamation and Resultant Mental Injury.
- Injury to any person under the contract of employment or apprenticeship with the insured their contractor(s) and /or Sub –Contractor(s) when such injury arises out of the execution of such contract.
- War and Nuclear Threats.
- Infringement of Plans, Copyright, Patent, Trade Name, Trademark, Registered Design.
- Assumed by the insured by agreement and which would not have attached in the absence of such agreement.
- Any criminal act or any act committed in violation of any law or ordinance.
- Services rendered while under the influence of intoxicants or narcotics.
- Any third party public liability.
- Any condition caused by or associated with AIDS.
Apart from all mentioned above, this policy will also not cover the Penalties, Loss of Goodwill, Medical Treatment given for Weight Loss, Plastic Surgery, Genetic Damages and conditions associated with AIDS.