Professional Liability Insurance, The Concept

By Author: Shackleton Risk Management
Total Articles: 1
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Normally, when there is talk about insurance, people refer to life, automobile, property, personal injury, and health insurance. There are other kinds of insurance policies as well. One such insurance policy is the professional liability insurance. This is not a new concept at all. It has its existence since a long period.
The concept:
Many people give professional advice to individuals and companies. There may be occasions where a client would encounter a huge loss because of following the advice given by the advisor. The client may approach the court of law seeking damages from the advisor. The court may rule in favor of the client thereby ordering the professional to pay damages for his or her negligence.
One such common example of such a scenario would be from the medical field. A botched-up operation can cause a great amount of pain and loss to the patient. The patient has the right under the law of the land to file a claim in the court against the doctor as well as the hospital claiming compensation for the pain and the loss.
We can take another example as well. A client may purchase ...
... a software program for his business. In case the software program does not function properly, there could be a monetary loss to the client. The client can file a suit against the Company and win the case as well.
This brings us to the concept of the professional liability insurance. The professionals can buy insurance cover to take care of such eventualities. This insurance cover is available to both individuals as well as companies that provide such services to clients. The insurance companies refer to such insurance cover as pi cover.
The insurance cover:
Usually, the insurance cover is available for a fixed period. You may have to renew the policy just as you do with a mediclaim or a general policy. In case there is no claim during the period, the professional forfeits the amount of premium.

What does the insurance not cover?
Acts that involve criminal prosecution do not come under the purview of this policy. This claim covers negligence, errors, omissions, misrepresentations, etc on the part of the client. However, if these activities for part of a criminal investigation, the insurance cover is not available.   
The insurance professional indemnity does not cover acts of defamation, slander, breach of contract, intellectual property violations, and personal injury.
Claims relating to incidents before the insurance coverage do not come under the policy. However, you can take insurance cover from a retroactive date under certain circumstances by paying an extra premium.
Advantages of taking this policy cover:
The professional advisor renders such advice to many people during his normal course of duties. He may not anticipate which advice will go wrong. Hence, having a professional liability insurance policy cover can be helpful under such circumstances.
This insurance policy covers the aspect of negligence. However, if the client were able to prove deliberate negligence, then the matter might become subject to criminal investigation. The policy cover would not be available under such circumstances.