The Must-have Cover for Your Professional Services Firm

Another name for professional indemnity insurance is errors and omissions (E&O) cover. They’re the same. This coverage helps give peace of mind to businesses that charge a fee for providing services or advice.

What is PI/E&O insurance?

PI insurance covers professional services  for errors and omissions that could lead to third-party bodily injury, property, or economic damage.

Therefore, businesses can be sued for giving incorrect advice causing a loss as well as not giving advice you’d reasonably expect from a professional.

Typically, a PI/E&O policy covers your business for:

• Civil liabilities claims
• Defamation – libel or slander
• Copyright infringement
• Misrepresentation
• Invasion of privacy
• Property damage
• Bodily injury claims arising from the professional services
• Economic damage to the client, such as costly time delays, budget overruns and rework
• Legal costs and expenses involved in defending and settling claims
• Public relations expertise to protect your business reputation
• Estates and legal representatives, if, for example, a business owner dies or is incapacitated, the policy continues to cover the estate, heirs, and legal representatives for subsequent claims.

Each policy has a limit of indemnity. That’s the maximum dollar amount the policy covers during the policy period.

Why professional services need PI

Before they’ll work with you, some of your clients may ask you to sign a contract saying you have PI cover. Would-be clients might view your PI insurance as a sign of your professionalism.In some sectors/professions, PI insurance is a requirement, either legally or as part of your registration or accreditation.Be sure that the policy you select covers all your professional activities. That saves confusion about what will and won’t be covered.For example, if your policy lists you as a consulting building certifier, but you also do work that’s not standard in that profession, you’ll need to specifically list that activity in the professional services description.Or you might be a content marketing writer who has started a podcast. Perhaps one of your interviewees has defamed someone and you don’t pick that up before that episode goes live. That podcast could lead to a defamation claim against you.As well, most PI policies are issued on a ‘claims made and notified’ basis. So, when you’re taking out a new policy, we’ll ask you about professional services you’ve provided in the past, so the policy can also cover these. For that to happen, it must be listed in the professional services description. This way, your coverage should start before your policy starts.

As your broker or adviser, we can help ensure your policy is customised to all your business services and advice, including those you expect to offer.

The potential cost of not having PI cover

The risk of operating in professional services without PI insurance is being sued and facing high legal costs to defend yourself. You may be significantly out of pocket, whether you win or lose.

Lack of insurance is a more widespread risk than you might think. One in eight Australian SMEs has no insurance, says McKinsey, but its report doesn’t cover PI insurance or the professional services sector.

You’ll need to check if PI insurance is mandatory in your sector. Usually, financial advisers, migration agents, architects, and other building professionals need this cover to operate legally or ethically.

Even once you stop practising or retire, you should invest in continuing cover, also called ‘run-off cover’. Your advice and services could have a long-term effect, so you could face claims of professional negligence for many years.

For instance, you could be liable if you gave a client financial advice today and they followed it and suffered a financial loss in a few years. Just because the policy was in effect when you gave the advice, doesn’t mean it would be covered if the claim happened years later.

Typically, you need to apply for runoff cover and there may be an extra premium.

We’re here to ensure your policy is a perfect fit for your business circumstances. Call us so we can discuss a review of your risk protection.