Professional Indemnity Insurance

Commercial Insurance

What is Professional Indemnity Insurance?

Professional Indemnity Insurance, also called Professional Liability insurance or Errors & Omissions (E&O) in the US, is a form of liability insurance that protects individuals or companies who render professional advisory services from legal defence costs and claims by their clients – for damages arising from alleged breach of professional duty of care, acts of negligence, and errors & omissions in the course of their business.

Do you need Professional Indemnity Insurance?

Errors and omissions can happen at times even by an experienced professional. A mistake may cause a business to suffer financial loss from hefty legal fees and compensations. Professional Indemnity Insurance can protect your business as well as your employees against an allegation of negligence, error or omission from a third party when rendering your Professional Service.

Your business may require professional indemnity insurance if

• It provides advice/professional service to clients
• It handles confidential information
• It uses copyrighted material or intellectual property belonging to others
• You belong to a professional body where Professional Indemnity insurance is compulsory and an industry specific legal requirement
• A client requires your business to be insured for professional indemnity before awarding you a contract

Who needs Professional Indemnity Insurance?

• Accountants/Auditors
• Architects
• Designers (web designers, graphic designers and interior designers)
• Engineers & other construction-related professionals
• Property managers, agents and real estate agencies
• Employment Agencies
• IT/Technology consultants
• IT professionals such as website developers, digital marketers
• Management/Business/Human Resource consultants
• Multimedia companies
• Doctors, Surgeons, TCMs & other medical providers
• Medical Aesthetic companies, beauticians, hairdressers and spa operators
• Marketing Researchers
• Teachers and Tutors
• Personal Trainers in physical sports, such as MMA, Yoga, Dance, fitness, pilates etc.

What does Professional Indemnity Insurance cover?

A broad range of potential risks are covered to help protect your business. Professional Indemnity Insurance should cover both your business and any related employee or entity as they provide the professional services and duties.

• Any actual or alleged breach of duty
• Negligent acts, errors, omissions or misstatements
• Breach of Confidentiality
• Defamation or Libel
• Intellectual Property Rights Infringements
• Loss of Documents or Data
• Dishonesty of Employees
• Defence Costs
• Court Attendance Costs
• Public Relations Costs
• Claims Investigation Costs

Examples of Professional Indemnity Claims:

Infocomm Technology: Accidental Leak of Customer’s Data

A small SAP consultant was performing a routine system patching/updating of their customer’s database and accidentally uploaded personally identifiable information to a server to which the public had access and was sued by the customer.

A Professional indemnity insurance can provide cover for privacy breach. To mitigate the data leak, the policy can also pay for the cost incurred to re-patch and retrieve the personally identifiable information along with the cost of engaging IT forensic investigators subject to the policy terms and conditions.

TCM: Medical Malpractice

A patient sought treatment at a TCM clinic to ease her shoulder pain. She was administered moxibustion treatment and suffered a third-degree burn and painful blisters on her arms.  She sued the TCM for alleged negligence.

If proven negligent, a professional indemnity policy can pay for the TCM’s legal defence cost and compensations awarded subject to the policy terms and conditions.

How much Professional Indemnity Insurance do I need? How much does it cost?

Professional Indemnity Cover is sold in variable limits and amounts. If your business belongs in an industry where such cover is a legal requirement, there will likely be a minimum amount of cover prescribed. E.g. The law society requires every lawyer to be covered for at least S$1m for each and every claim for lawyers practicing in sole-proprietorships and partnerships and S$2m for lawyers practicing in limited liability law corporations (LLCs) and limited liability law partnerships (LLPs).

You may also check whether contracts awarded by your clients specify a level of professional indemnity insurance required, and/or whether potential clients expect a certain level of coverage from their suppliers/vendors.

It is important to note that these are minimum requirements and you may decide that your business needs a higher coverage depending on your business needs. When assessing risks, Insurers will want to understand the probability and resulting consequences when a wrongful act occurs. Some factors determining the amount of insurance to buy and the costs are:

• What is the business/company/contract size of the clients you serve?
• Do you have clients based overseas? Which countries?
• What is the turnover or professional fees earned for your business?
• Estimated costs of legal defence when things go wrong?
• Highest potential financial loss that a third party can claim against you based on the value of contracted awarded?
• How risky is your industry/occupation?
  • Riskier services or advice rendered will translate to higher costs incurred
• The employees/individuals being covered
  • Are they qualified for the job?
  • Do they have a previous history of such claims against them?

Why choose ALLEGIANCE?

In an environment of increased responsibility and accountability, Professional Indemnity Insurance is becoming an essential tool of risk management for many professionals, allowing you to operate confidently and with the knowledge that your risk exposures are covered.

If your business requires interaction with members of the public in anyway e.g. making deliveries to customers, customer visitation, working at customers’ premises, etc., Public Liability Insurance should also be part of your business risk management toolkit.

At ALLEGIANCE, we ask the right questions to identify your business risks accurately, ensuring you get the right protection.

For a discussion, call us at 6513 6983 or email: client.service@allegiance.com.sg

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