We’re going to assume that you already know a bit about professional indemnity (PI) insurance. If you don’t, no problem, have a read of our guide to PI. It’ll help get you up to speed.
Now, we know that PI insurance helps protect your business if a client alleges you’ve been negligent and made a mistake. Or if they say you haven't done your job to the expected standard.
But we also know no two PI claims are alike…and that the potential outcomes can be very different. So, to illustrate how one might go, we’re going to give you some real-life professional indemnity insurance claims examples.
Duty-bound
Specific claims vary by industry so it’s difficult to cover everything here. For example, architects don’t face exactly the same risks as accountants. Claims against photographers are different from those against IT consultants.
Nevertheless, it’s important to take on board that all professionals have a duty of care to their clients when they undertake work for them. It’s a breach of that duty of care that usually results in a claim.
Blame game
Call it Murphy’s Law or simply ‘a bad day’…but mistakes are likely to happen at some point when you’re doing some work for someone.
Nobody’s perfect, of course. Still, most clients expect better-than-the-average-man-in-the-streets levels of expertise when they hire you. And they’re likely to be particularly unforgiving if that means they lose out (or think they're losing out) financially.
To fix matters, they’ll want compensation, whether you’re actually at fault or not. Unfortunately, any professional can be accused of negligence. And if someone does sue you, regardless of whether the claim is valid or not, you'll still have to do something about it.
And that's where your professional indemnity insurance helps – by fighting claims against you and picking up the tab for legal costs and any compensation you owe at the end of it.
Common professional indemnity claims scenarios:
Professional indemnity insurance covers a whole range of different claims scenarios, including defamation and loss of physical documents. In our experience, these types of claims are relatively rare, though.
The examples of professional indemnity insurance claims we see our customers face most often are usually to do with one of the following:
1. Making a mistake (negligence)
‘Negligence’ is a broad term and it covers a whole range of possible circumstances. It certainly doesn't need to be deliberate or even obvious.
But in the context of most professional indemnity insurance claims examples, ‘negligence’ is where you’ve failed to deliver the professional service you owe your client (that ‘duty of care’ thing we mentioned at the start). And it costs them money.
This could be anything from a flawed design for a conservatory that requires a total rebuild, to an accounting error in a client’s books which means they're fined by HMRC for underpaying tax.
2. Sharing someone’s private information without their permission (breach of confidentiality)
Examples of professional indemnity insurance claims that involve a breach of confidentiality are almost always down to human error. They’re usually because someone’s accidentally lost or shared their client’s confidential data in a way that’s particularly damaging to them.
It’s easily done in this tech-forward age, where lots of sensitive information could potentially be seen by lots of the wrong people with one too-hasty click of a mouse.
We’ve seen claims examples where a customer’s professional indemnity insurance has had to step in and save the day because they've emailed their client’s sales report to a competitor by mistake. An embarrassing and costly mistake to fix without PI, when you factor in both the court costs and compensation you would be liable for.
3. Using someone else’s work without their permission (intellectual property infringement)
There are many different ways to breach someone’s intellectual property, including copyright infringement and intellectual property (IP theft). The examples we see most often among professional indemnity insurance claims is where some hapless pundit has used someone else’s work and not credited them properly.
Again, it’s easily done. It’s not always clear who owns what on the internet. And if you mistakenly pull someone’s image from a stock image library and use it outside of the limits of its license, or reproduce copyrighted material without permission, you run the risk of receiving a letter from the owner’s solicitor.
What’s more, you can get into trouble not just for nicking someone else’s work but for copying their ideas too. So, you’d better make sure you do your research on what intellectual property is…a common claim we see is where someone’s logo, brand, business model, or any other tangible aspect of their business, closely resembles that of a competitor.
Six real-life professional indemnity insurance claims examples
As promised, here are some actual professional indemnity insurance claims examples (of various types) we've dealt with, made against actual clients (of various types).
Claim #1: The architect
An architect was sued by his client for the costs of rectifying an extension built from a flawed design. The insurer paid £22,500.
Claim #2: The web designer
Image owners sued a web designer’s client for using unlicensed pictures on his website. The client sued the web designer. The insurer paid £9,000.
Claim #3: The logistics company
A logistics company was sued by a competitor for copyright infringement and intellectual property theft relating to their business model and their website. The insurer paid £170,000.
Claim #4: The IT consultancy
An IT consultancy’s web hosting partner company was hacked – the consultancy’s clients’ websites went offline for a day. The consultancy was sued for loss of business by one of its clients. The insurer paid £3,200. (Thank goodness it didn't go on for longer.)
Claim #5: The marketing agency
A marketing agency omitted a digit from a client’s phone number and left out their web address in a printed advert. A commercial decision was made to reprint the advert at the agency’s cost. The insurer paid £21,995.
Claim #6: The wedding photographer
A wedding photographer was accused of not getting the shots the happy (now unhappy) couple wanted. They complained to the photographer, demanding some of their money back. The insurer paid £1,400. (A small claim but one we see happen fairly often.)
Makes you think, doesn’t it?
What’s clear from this quick run-down of real-life examples is that professional indemnity insurance claims come in all shapes and sizes. And cost a lot of money when you stack up compensation and defence costs – not forgetting that the sums involved get more eye-watering by the year.
Mistakes happen no matter how careful you are…or think you are. Anticipating them isn’t easy (you wouldn’t need professional indemnity insurance if it was) but, thankfully, protecting yourself is. To find out more about how, call our team on 0345 222 5391.
Image used under license from iStock.
claimsinsurance explainednegligenceprofessional indemnity insurance