Search for insurance help
Professional Indemnity Insurance Fact Sheet
to alleged or actual negligence in your professional services or advice and includes cover for defence costs.
In our blame-culture society, it’s important for professionals to protect themselves against claims of malpractice or professional misconduct which have the potential to cripple
your business or ruin your reputation.
Professional Indemnity, often referred to as PI insurance, is designed for professionals who provide a specialist service or advice. For example, accountants, allied health professionals, real estate agents, engineers and other types
of professional consultants. It provides protection if a claim is made against you or
your business for loss arising from an act, error, omission or breach of professional duty made in the course of your professional business. It can assist you even if a claim is ultimately found to be false.
Do I really need Professional Indemnity insurance?
then the short answer is likely to be yes.
But it’s not only the financial side that has the potential to take a toll on your business. It may also consume a huge slice of your time to prepare and defend against a claim of professional misconduct, breach of duty or
Having Professional Indemnity insurance helps you minimise the disruption to your
business. For claims covered by your PI policy, you will also have defence costs cover. This means that your insurer will have (and pay for) a specialised legal team to take on your defence, negotiate a settlement or represent you before a Court.
Did you know?
There is a legal requirement for some types of occupations to hold a minimum level of Professional Indemnity insurance, for example, accountants and tax agents, migration agents, allied health professionals, architects, and real estate agents.
What is typically covered?*
- Payment of compensation as a result of a professional negligence claim, including but not limited to Court awarded damages
- An award of legal costs against you
- Reasonable legal costs incurred in defending or responding to a claim
- Claim investigation costs
- Disciplinary proceeding costs
What is typically not covered?*
- Claims and circumstances known prior to inception of the policy
- Contractual disputes
- Disputes in relation to your professional fees
- Personal injury or property damage (unless caused by a breach of your professional duty)
- Intentional damage
- Fraud or dishonesty
Always read the Policy Wording to understand the terms and conditions of Professional Indemnity Insurance cover, including any applicable exclusions.
Claim Case Study*
who owned several investment properties. Despite being provided with all relevant
documentation by the client, the accountant failed to include capital gains tax from the
sale of one of the investment properties.
Several months later the client received a letter from the ATO advising they were required
to pay $220,000 which comprised an amount of capital gains tax plus penalties and
interest. The client issued a demand on the accountant alleging he had acted negligently
in preparing and lodging the tax return.
The accountant’s Professional Indemnity insurer appointed solicitors to manage the claim and attempt to negotiate a settlement. At mediation, it was agreed that the accountant had required the client to review the tax return before submission to the ATO such that the client had themselves also contributed to the loss.
A settlement of $180,000 was agreed, which was met by the accountant’s Professional Indemnity insurer. The insurer also paid $25,000 in defence costs.
*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover. © 2023 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769
All information above has been provided by the author.
Related insurance brokers
a few minutes
a few minutes