As an example, an investment broker would provide financial forecasts in the stock market to businesses and individuals. The broker would then advise the client where best to invest large numbers of shares, in order to increase their portfolio of wealth.
The stock market, being a volatile and difficult industry to predict, comes with the chance that any shares may increase or plummet as a result of an unforeseen national or global incident. Because there are so many factors at play, many times a broker can make a mistake, causing the loss of funds for his or her clients.
Professional indemnity insurance is looked at as a safety-net in place to cover the broker in the unfortunate event their advice causes a major loss for the client. As the client’s business success may hinge on the advice delivered, many people would not hesitate to begin legal proceedings against the broker to ensure their own business does not go under.
Defending legal action could be extremely costly itself, without including the cost of any damages awarded against you, the cost of your absence to attend legal proceedings, and the potential reputational damage to your company. Therefore, you must have robust insurance available to assist you both through the process in a manner enabling you to adequately defend yourself, in addition to allowing you to carry on your business and continue providing reliable service to your clients.
This same analogy can be applied to accounting, information and technology, engineering, real estate and property, structural inspections, mining, human resources, trainers or instructors, medical industry staff, etc. Many industries now require this type of insurance as a mandatory cover before trading due to past court settlements causing consultants and their consultancies to close down.
Professional indemnity insurance can include cover for:
- bodily injury and property damage
- claims of malpractice, professional conduct, breach of duty
- claims against the actions of partners, employees or volunteers for whom you are being held responsible
- legal defence costs and claim investigation costs
- civil liability matters such as defamation, breach of intellectual property
Professional indemnity insurance ordinarily will not cover intentional damage and contract liability.