Professional Liability Insurance: Everything You Need to Know

Nowadays, we seek professionals for most things in our lives. We need professionals even for styling our hair, getting a massage, or doing cosmetic makeup. Doctors, engineers, chartered accountants, lawyers, architects and other professionals help us in many ways. While professionals are in great demand, they are often at the receiving end if the clients find any negligence or lack of commitment in their services. To get protection from the financial losses incurred due to legal claims, they can avail professional liability insurance.

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What is professional indemnity insurance?

Professional liability insurance also known as professional indemnity insurance is meant for professionals who provide different types of services. It protects them from claims of any type made by their clients. For example, a patient may sue a doctor for inappropriate treatment or negligence while performing a surgery. This would not only impact the doctor’s reputation but he would also need to pay a hefty penalty for the inconvenience caused. Even companies that offer different kinds of professional services can get indemnity insurance to stay protected from claims made by their clients.

Why should you get a professional liability insurance policy?

A professional indemnity insurance policy covers professionals and companies from the legal costs and other expenses incurred due to client claims. The lawsuits filed by the clients can be quite expensive and may affect your business drastically. Even competent businesses and professionals get legal notices from their clients for petty reasons. Therefore, as a professional, you cannot be reluctant in these matters even if you work honestly for your clients.

Getting a professional liability insurance policy also ensures that your clients get compensated due to any negligence on your part or inappropriate service provided by you. Therefore, it also acts like an assurance to your clients and helps you conduct the business without any issues.

As the professional indemnity insurance provides coverage for various costs or expenses while rendering the services, most businesses and professionals prefer to subscribe to it.

Key Features Of Professional Liability Insurance

Protection from unforeseen events: Professional indemnity insurance protects businesses and professionals from unforeseen events like property damage, bodily injury, and other liabilities that arise due to contractual breaches, lawsuits, legal disputes, advertising rights, and more.

Wide coverage: A professional liability insurance policy covers lawsuits, litigations, medical costs, personal injury, and other forms of liability resulting in loss of physical, bodily, or intellectual loss of a third party.

Defence costs: The indemnity insurance also reimburses the expenses charged by your defence lawyer for defending your case in the court. The defence costs are paid from the sum insured and are covered only for the cases that are contested within the country.

Breach of contract: If you fail to comply with the contractual obligations like delivering a project on time, the client may file a claim against you. The professional liability insurance protects you from such events as well.

Characteristics of Professional Liability Insurance

Professional reputation protection: An indemnity insurance policy allows you to settle the claims with the clients without taking a legal route. It not only saves your professional reputation but also ensures that your work with existing clients does not get hampered.

Retroactive date: Many insurance providers specify a date to indicate the number of days that are covered under the indemnity insurance before getting the policy. This date is known as a retroactive date. The retroactive date helps a business to cover the losses due to the claims made by the third-party before subscribing to the indemnity insurance. However, all the insurance companies might not include this coverage.

Tail reporting coverage: Tail reporting coverage is a specific insurance policy that covers the events that occur within the policy tenure. In simple words, the events are reported at the end of the policy tenure and therefore, it is named as tail reporting coverage. If the insurer does not renew the policy in time, the events that occur within the period are to be covered by an extended coverage. It increases the premium of the policy especially if the insurer uses the coverage for any claims.

Do dates transfer: Do dates transfer also known as prior acts cover is referred to the process by which the retroactive date is transferred from an old insurance plan to a new professional indemnity insurance policy. It negates the need for getting the tail cover.

Types of Professional Liability Insurance

Malpractice Insurance: This type of indemnity insurance is mostly provided to doctors and other health care professionals who may cause bodily damage or injury due to negligence or wrongful treatments.

Errors and Omissions Insurance (E&O): This type of indemnity insurance policy is provided to the architects and attorneys who cause financial losses to their clients due to errors and omissions or negligence. It also covers the defence costs of the insured.

Civil Liability Cover: All the liabilities like defamation, breach of agreements, damage to body or property due security issues, theft of intellectual property, etc. are covered by this policy. It is basically opted by professionals who want additional coverage than a regular professional liability cover.

Professional liability insurance plans available in India

Policy Name	Sum Insured	Policy Tenure	Key Features
Professional Indemnity Insurance for Doctors – Bajaj Finserv	Rs. 50 lakh to Rs. 1 crore	1 year	Policy premium is Rs. 9,440 for Rs. 50 lakh sum insured and Rs. 12,980 for Rs. 1 crore sum insured Coverage for defence costs, slander, libel, document loss, third-party damages, confidentiality breach, and other events is provided by this indemnity insurance policy. Speedy claim settlement within 30 days is provided by the insurer. Easy claim procedure is provided by the insurer. Criminal acts, penalties, punitive charges, fines, loss of goodwill, medical treatments for plastic surgery, genetic disorders, weight loss, and ailments linked with aids are not covered by this policy.
Professional Liability Insurance Policy Online by Digit Insurance	As per the requirement	1 year	The claim process is quick and seamless. The claims are processed with zero documentation. The premium offered by the indemnity insurance policy is affordable.
Professional Indemnity Insurance Policy by Reliance General Insurance	NA	1 year	Applicable for different types of professional services. The insured can increase or decrease the sum insured during the mid term of the policy tenure. Legal expenses and costs are covered by this indemnity insurance policy.
Professional Indemnity Insurance for doctors by ICICI Lombard	Rs. 5,00,000 to Rs. 5,00,000		18+ professionals are eligible for this policy. More than 35k medical practitioners are covered by this professional liability insurance annually. Physicians, radiologists, paediatricians, dentists, anaesthetists, gynaecologists, and other medical practitioners are covered by this professional liability insurance plan. Retroactive cover is available for the insured to cover the claims occurred in the past years. Legal counsel services support is provided to the insured.

Inclusions & Exclusions Under Professional Indemnity Insurance

What’s covered?

A professional indemnity insurance policy provides coverage for these things:

Professional negligence – If your client files a claim for negligence against you or any of your employees, the professional liability insurance covers it. It protects you from the unintentional mistakes that can happen while providing professional services to an individual or company.

Damage to property or body – If your client faces any bodily injury or property damage due to errors or negligence on your part, the indemnity insurance covers it.

Document loss – Sometimes, the essential business documents like client contracts could be lost or damaged resulting in an altercation between you and your clients. The professional liability insurance protects you if the client raises any claims due to it.

Legal expenses – The expenses that would be incurred for fee payment of the lawyer and other legal costs are covered by the indemnity insurance policy.

Public relation costs – The claims raised by your clients may also hamper the reputation of your company. You would need a public relation expert to save your reputation from the media trials and similar sorts of issues. The professional liability insurance policy will also cover the fees of the public relation expert.

What’s not covered?

If you are found under the influence of drugs or alcohol while providing services to your clients/customers, the professional indemnity insurance will not provide coverage for any events that occur while rendering the services.

Criminal activities, law violations, and all types of frauds that may cause property, personal, or intellectual damage to a third-party is not covered by this policy.

The losses caused due to wars, earthquakes, and other types of natural disasters are not covered by indemnity insurance.

If you suffer a financial loss due deteriorating goodwill or reputation in the market, it is not covered under professional liability insurance.

The acts like infringement of copyright law, patent law, registration, trademark, etc. are not covered under this policy.

Civil liability claims or disputes are also not covered by the professional indemnity insurance.

Defamation, illegal detentions, libels, wrongful eviction, and similar legal liabilities are usually not covered under a regular indemnity insurance policy.

Claims filed due to the events that happened before subscribing to the indemnity insurance policy are usually not covered. However, the claims filed due to events that happen after the retroactive date are covered by the policy.

If the insured gets indemnity insurance after an event that can lead to claims knowingly, then such events are not covered by the professional liability insurance policy.

Fines or penalties inflicted due to civil or criminal disputes are not covered by this policy.

If the claims have arised due to non-payment of loan or debts, they are not covered by the professional indemnity insurance.

Who should get a professional indemnity insurance policy?

Any company or professional who provides services to clients or customers should get a professional indemnity insurance policy. It includes the advisory, consultation, and other professional services related directly to the customers. Interior designers, accountants, graphic designers, IT services companies, healthcare professionals, advertising agencies, market research experts, architects, civil engineers, consultants, and other professionals must subscribe to indemnity insurance to protect their financial interests from the claims or lawsuits filed by their clients.

It is also recommended for small or medium sized businesses that provide any kind of services to clients or customers. Lawyers, attorneys, stock market brokers, real estate brokers, brokerage firms, insurance agents, public notaries, hospitals, dental clinics, massage parlours, spas, beauty salons, and other service providers can also get it to remain unaffected from the legal actions or lawsuits filed by the clients or customer .

Things to consider while getting a professional liability insurance

Professional indemnity insurance costs: Before getting an indemnity insurance, you must evaluate the type of incidents that can create a professional liability for your business. Also, you should evaluate the price that you can bear to pay as a policy premium. Think of all the legal needs and contractual requirements for which you need indemnity insurance for. Choose an insurance policy that offers the right coverage without weighing down your finances.

Type of insurance: Different professionals are providing services at different levels in our society. The growth of the technological sector has given rise to many types of professionals apart from regular professionals like architects, doctors, lawyers, and engineers. Insurance companies tend to carefully evaluate the risks associated with these businesses before offering indemnity insurance to them. Many insurance providers even provide specialised insurances for different types of professionals. Therefore, you can choose a professional liability insurance policy that suits your kind of business.

Geographical limits: The indemnity insurance policies may have different jurisdiction and geographical limits. Before choosing indemnity insurance, you must ensure whether a specific policy or insurance company provides services in the location from which your business operates. Also, you must consider the locations of the clients or customers from where they can raise a claim against you.

For example, if an international client of yours files a claim against you, the professional indemnity insurance plan that you have taken in your country might not cover the legal expenses for defending your case in a foreign land.

Policy coverage: The scope of policy coverage should be gauged perfectly before applying for indemnity insurance. If the policy coverage does not mention details like coverage for third-party risks, it is not worth spending your hard earned money on it. For instance, some professional indemnity insurance policies may only provide coverage for claims made by patients for psychologists. However, it may omit the instances when the claim is made by a third-party due to them getting attacked by the patient. Therefore, you must evaluate the policy coverage carefully while getting professional indemnity insurance online.

Choose the sum insured wisely: The coverage amount or sum insured of the indemnity insurance must be selected as per the risks involved in the business. The professionals who are serving in a high-risk profession like lawyers and doctors must select a higher sum insured as compared to accountants. The sum insured must also be higher if you live in an area where filing lawsuits and legal claims is common for the citizens.

In indemnity insurance plans, the sum insured is also referred to as the limit of indemnity. This limit is determined as per the events or policy tenure called AOA (Any One Incident) limit or AOY (Any One Year) limit. The AOA to AOY ratio can be selected from the following options:

For example, the AOA to AOY ratio is 1:4 or 25% for professionals like doctors, engineers, chartered accountants, etc. It simply means that the sum insured will be restricted to 25% for each claim and a total number of 4 claims can be raised for one year.

When can you claim a professional liability insurance policy?

Whenever your clients/customers file legal claims saying that you have been negligent or dishonest while rendering the services, you can think of claiming your professional liability insurance. Claims like contract breaches, defamation, theft of intellectual property, etc. need to be dealt with immediately because they can damage you both financially and reputation wise. Sometimes, it is prudent to pre-empt an event and act in advance. For example, if one of your clients writes down an alarming letter accusing you or your work, it may be wise to inform your insurance agent or company immediately. You can try to solve the issue by yourself, but it would also make sense to be prepared for a legal claim. Here are some steps that you should take while claiming a professional indemnity insurance policy:

Step 1: Inform immediately

It is better to inform the insurer immediately after you receive a legal notice/claim by your client. You should ask the insurer about the claim process and take the necessary steps as soon as possible.

Step 2: Fill the claim form

Most insurers would ask you to fill a claim form. The details of the claim like the nature of claim, the reasons, etc. should be provided clearly in the form.

Step 3: Submit the form with documents

Once you have filled the claim form, you must submit it along with the documents that support your claim. For example, if you are a doctor and one of your patient’s has filed a legal claim, you should attach the documents like medical reports and other evidence that establish your innocence. Also, you must submit the copies of the legal notice sent by your patients. It will help the insurance company to verify your claim. The supporting documents can vary as per the profession or business in which you are working.

Documents required to be submitted along with professional liability insurance claim form

Application or claim form that contains all the details of the legal claims of your clients/customers
Legal notices or lawsuits (if filed by your clients/customers)
Registration certificate validating your professional expertise
Licence copies for businesses like clinics and hospitals
Details of the clients (to verify the severity of the financial loss incurred to them)

Step 4: Wait for the process to be completed patiently

Once you have done everything from your end, you should wait for the verification process to be completed patiently. The nature of the claim made by your clients may be such that the insurance company may require a few days to complete the process. You must keep a track of all the communications received from your client and the insurer during this process.