Professional indemnity insurance (PI), also known as errors and omissions (E&O) insurance, protects professionals against claims made by clients or third parties for losses due to professional negligence, errors, or omissions in the service provided. Here’s a detailed look at the main aspects of professional indemnity insurance:

1. Purpose of Professional Indemnity Insurance

• Protection: Provides financial coverage if a client suffers a financial loss due to mistakes, inadequate service, or poor advice provided by the professional.
• Industries: Common in professions that provide advice or services, such as consultants, architects, accountants, lawyers, IT professionals, and medical practitioners.

2. What Professional Indemnity Insurance Covers

• Negligence: Claims due to errors or omissions in work that caused financial harm to the client.
• Breach of Duty: Coverage for breaches of professional duty, such as failing to meet industry standards.
• Misrepresentation: Claims arising from inaccurate information or misrepresentation given to clients.
• Intellectual Property Infringement: Coverage for unintentional infringement of intellectual property rights, such as copyrighted material or trademarks.
• Defamation: Covers legal claims due to accidental libel or slander that damages a client’s reputation.
• Loss of Documents or Data: Protection against claims for losing or damaging important documents or data entrusted by the client.

3. Legal Defense Costs

• Professional indemnity insurance covers the legal costs for defending against claims, whether the claim has merit or not. This includes attorney fees, court costs, and potential settlement amounts, which can be substantial even for minor cases.

4. Claims and Coverage Limits

• Indemnity Limit: This is the maximum amount the insurer will pay per claim, which can range from a few thousand to several million dollars based on the policy.
• Aggregate Limit: Policies may have an annual aggregate limit, meaning the total amount payable for all claims within a policy period.
• Excess/Deductible: Most PI policies have a deductible, or an amount the policyholder must pay before insurance coverage applies.