For Small to Medium Enterprises (SME’s) and Start-ups

Understanding your Risk Landscape: Professional Indemnity

Professional Indemnity insurance, often referred to as professional liability insurance or PI insurance, covers legal costs and expenses incurred in your defense, as well as any damages or costs that may be awarded if you are alleged to have provided inadequate advice, services or designs that cause your client to lose money.

Professional Indemnity insurance, often referred to as professional liability insurance or PI insurance, covers legal costs and expenses incurred in your defense, as well as any damages or costs that may be awarded if you are alleged to have provided inadequate advice, services or designs that cause your client to lose money.

Professional Indemnity coverage can protect a law firm or other service company against liability and help defray the cost of defense following a claim for an error, omission, or negligence in the performance of professional services.

Professional Indemnity has become “the products liability of the service sector,” with risks that are both extensive and complex. Companies that view their exposures as manufacturing- or product-oriented may be surprised to find themselves exposed to professional liability risks through outsourcing, online commerce, and intellectual property issues.

Professional Indemnity insurance is generally required to stay in place until any limitation period ends, which in the United Arab Emirates (UAE) is 10 years.

What are the key risks?

The risks of operating without Professional Indemnity insurance include:

  • Legal Risks – If you work in a professional sector, then Professional Indemnity insurance can protect you against civil liabilities, which include breach of duties, tort and contract.
  • Tort Liabilities – If you do not have a contract with your client but they have a legal case to make then they make it under tort law.
  • Breach of Statutory Obligation – Professional Indemnity insurance is required for certain industries to renew or maintain trade license like lawyers, VAT consultants, auditors, etc.
  • Breach of Duties – Professional Indemnity insurance can also cover you for breach of statutory duty, breach of intellectual property or breach of fiduciary duty.
  • Financial Risks – Operating without Professional Indemnity insurance leaves your business open to huge financial risk that comes from third party claims and liabilities.

What businesses can do to manage risk?

There are a few things that you can do to help keep your Professional Indemnity risk to a minimum:

Avoiding copyright issues
  • Be careful what you copy from the internet as this could cause issues for a business.
  • We suggest that to avoid copyright issues it is best to create your own intellectual property.
Preventing data breaches
  • Update all anti-virus and anti-malware software.
  • Encrypt all of your data.
  • Be careful about staff bringing their own devices to work (BYOD). Laptops, phones and tablets could have viruses that will get onto your network when they connect to the Wi-Fi.
Employee negligence
  • By losing client information and data or abusing intellectual property, you are putting your clients and your own business at risk.
  • Company laptops and any information or work data on the equipment should be handled with the utmost care. Advise your staff to be careful where they leave their laptops.
  • Make sure everyone is aware of the risks or the dangers of downloading programs from the internet. If possible, you should stop employees from installing new software on computers and have IT or management handle it instead.

Because professional liability risks are complex and extensive, identifying and quantifying your risks require a high degree of expert scrutiny. Businesses should evaluate their exposure from various vantage points, consulting with attorneys, economists, and actuaries, to ensure maximum coverage.

Marsh only acts as an intermediary in concluding insurance contract and therefore is not the capacity provider/ insurance carrier.