Professional Indemnity policies indemnify insured’s for amounts which they become legally liable to pay as a result of any actual or alleged negligent act, error or omission in the conduct of their business or profession. Costs and expenses incurred to investigate, defend or settle any claim are also included, in some circumstances in addition to the policy limit, otherwise inclusive of the limit.
A professional is defined as “anyone who gives expert advice and/or services to another person”. No matter what type of advice, design or area of the professional’s occupation, errors and omissions can occur.
Financial loss arising from a mistake or failure by a professional may result in an award in favour of an external party (often your client). Under the Trade Practices Act (1974), you may be deemed liable for mistakes, errors or omissions, even if the act was not negligent.
A Professional Indemnity policy is designed to protect the personal assets of a professional against damages awarded against them. It also covers the costs and expenses of defending claims.