What exactly is Professional Indemnity insurance? Well, our Professional Indemnity insurance definition has to begin with the word ‘negligence’. As a professional, you are viewed in the eyes of the law as someone who can be expected to carry out work to the degree of care and skill that would ordinarily be expected of a person with your particular expertise and experience. This is the standard of your judgement and opinions upon which your clients are entitled to rely – also known as your professional duty of care.
The Australian Consumer Law also requires you to provide your services with due care and skill – this means an acceptable level of skill and technical knowledge must be possessed by you and you must take the necessary care to avoid loss or damage. You also have legal responsibilities to ensure your services are fit for any specified purpose and provided within a reasonable time.
Now you might think that goes without saying that you’re a professional through and through. And undoubtedly you are. Most of the time. But we all make mistakes occasionally and understanding that we are all fallible is critical to understanding any Professional Indemnity insurance definition.
Maybe you’re an engineer and a mistake that you make in your calculations causes a major delay to the project you’re contributing to. Or perhaps you’re an IT consultant and a system you configured fails to meet the client’s specifications. Then again, you might be an events organiser who, because of a mix-up over dates, is unable to book the venue the client was expecting.
Of course we could go on and on with a list of possible scenarios. But the point is, for the purposes of our Professional Indemnity insurance definition, even though all of these unfortunate incidents stemmed from mistakes and not from any inherent lack of professionalism, they could all be construed as failing to show the necessary duty of care. They could all be construed as negligence. And it is on the grounds of negligence that our unfortunate professionals might very easily find themselves being sued for damages.
Which brings us to the second and most important point in our Professional Indemnity insurance definition. Professional Indemnity is an insurance policy that will cover you in such instances not just for the full amount of any compensation award that a court makes (subject to the policy limit) but also for any legal costs you incur in defending your case as well as the other side’s legal costs should they be awarded against you.
So, to summarise our Professional Indemnity insurance definition, any professional seeking peace of mind in relation to claims coverage may want to consider obtaining this cover.