Professional Indemnity Insurance

Professional Indemnity Insurance

Professional Indemnity Insurance is important for Canadian small businesses that provide a service to their clients. This coverage is designed to protect business owners and consulting service providers in case of errors and omissions due to negligence.

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Claims Examples

Coverage

Problem: You’re a physical therapist working with a patient with a knee injury. You ask them to try a new stretch to their test their flexibility. Unfortunately, they end up exacerbating their injury. 

Outcome: The client successfully sues your business for bodily injury. The bodily injury coverage could cover the legal expenses and medical fees, totaling $5,000.

Coverage

Problem: You’re a communications technician installing a new aerial wire in a customer’s backyard but neglect to notice it’s over a small pond. During a storm a few weeks later, the aerial wire is severed by a tree branch – it falls into the pond and electrocutes ten exotic fish. 

Outcome: The customer successfully sues your business for negligence. Your liability coverage could cover the cost to replace the fish and aerial wire, totaling $15,000.

Coverage

Problem: You’re a marketing project manager planning out a commercial for a new product launch. Your plan has the commercial ready for Black Friday, but an error in your scheduling means the commercial will be late, missing a crucial shopping period. 

Outcome: Your client sues you for failure to deliver a commercial on time. Your liability coverage could cover the legal expenses and settlement fees, totaling $190,000.

Professional Indemnity Insurance, Explained.

What is Professional Indemnity Insurance?

Professional Indemnity coverage may protect you from client claims alleging errors and omissions in the service you provided. It may also cover lawsuits alleging negligent advice or service to a client. The damages may be financial, as is the case with accountants, mortgage brokers, consultants, or it may be physical, as is the case with physiotherapists, dentists, and paramedics. 

Professional Indemnity Insurance may cover the legal costs and expenses related to legal proceedings and cover any compensation payable.

What does Professional Indemnity Insurance cover?

Professional Indemnity Insurance typically includes coverage for legal costs and damages related to the following coverage areas:

  • Unintentional breach of copyright
  • Monetary loss due to poor advice or negligence
  • Professional negligence and errors in service
  • Loss of documents or data

How much is Professional Indemnity Insurance?

For a basic Professional Indemnity Insurance with a limit of $100,000, you can anticipate spending approximately $250 a year. The cost of Professional Indemnity Insurance can vary due to several factors. Here are some of the things we take into consideration when determining the cost of your premium:

  • Years of Experience 
  • Annual and Projected Gross Revenue
  • Number of Employees 
  • Previous Insurance Claims

Who needs Professional Indemnity Insurance?

Professional Indemnity Insurance is essential for any business that provides advice, consulting services, or designs to its clients. For many industries, such as accounting and medical services, law professionals must carry professional indemnity coverage. For professions that do not require mandatory insurance coverage, it is highly recommended as a risk management practice and may assist in securing contracts.

When is Professional Indemnity Insurance required?

Not all professionals who offer services must have professional indemnity insurance; however, it’s recommended for any professionals who provide a service or consulting, as it protects against costs associated with claims or lawsuits tied to your business.

If you’re not sure about the legal insurance requirements for your profession, check with your Provincial or trade-specific regulatory body.

For example, private practice lawyers are required to carry professional indemnity insurance to practice in Ontario.

What is not covered by Professional Indemnity Insurance?

Professional Indemnity coverage may only protect you from claims of damage to clients due to errors and omissions in the service you provided or alleged negligence, which has resulted in damage to a client. Here are some examples of what would not be covered under this coverage:

  • Intentional or wrongful acts; 
  • Criminal, dishonest, or fraudulent acts (you need Crime Insurance); 
  • Violation of securities acts; 
  • Cost guarantees or price estimates; or, 
  • Incorrect estimates of profits or economic returns

Frequently Asked Questions about Professional Indemnity Insurance

What is the difference between professional indemnity insurance and professional liability insurance?
There is no difference between the two in Canada; however, Professional Indemnity Insurance is a term that is more popular overseas. In Canada, the same coverage is provided by professional liability, also often referred to as errors and omissions insurance or E&O. In some industries, such as medical services and law, it is also referred to as Malpractice Insurance.
Does professional indemnity insurance also provide coverage for professional tools I use for work?

No. Professional Indemnity only covers losses to third parties caused by errors or omissions in your advice or service. Professional Indemnity Insurance will not cover tools or equipment you use for work. If your business utilizes expensive tools and equipment, consider adding Tools and Equipment Coverage to your business insurance policy.

Do I need malpractice insurance in addition to professional indemnity insurance?

Malpractice insurance and professional indemnity insurance provide the same coverage. In some industries, such as law and medical services, malpractice insurance is a more common term than professional indemnity coverage. Regardless of what you call it, professional indemnity/malpractice insurance is essential for any business that provides a service or advice.

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