Any company or individual that provides professional advice or services can be held liable for financial loss that occurs as a result of an act, error or omission in carrying out their work. Does this apply to you? If so, it might be time to purchase Professional Indemnity Insurance for your engineering business.
What is Professional Indemnity (PI) Insurance?
PI Insurance is designed to provide you and / or your engineering firm with financial protection against claims alleging loss as a result of your professional advice or service.
PI Insurance acts to insulate you against this financial exposure and extends to cover legal defence and investigation costs incurred arising out of a potential claim or allegation.
There are different levels of PI cover available. Cover can commence at $1 million and range upwards from this depending upon your business needs, and any limit requirements which may be stipulated in your contracts.
To read more on Professional Indemnity cover: Click here.
Do I need PI Insurance?
If you perform certain business activities it is vital to have PI cover in place, and can be a major financial risk to go without it. Essentially…
If you are a company or individual that provides professional advice or services, and can be held liable for financial loss that occurs as a result of an act, error or omission in carrying out your work, you should have PI Insurance.
As a guide, PI Insurance is important for any individual or business which:
- Provides professional advice and / or services
- Provides design services
- Has a ‘duty of care’ in services delivered
- Has an obligation to hold PI Insurance in order to fulfil contractual requirements
- Carries a risk of being held legally and / or financially responsible for damages as a result of work performed
- Has the potential to be joined in legal action with other parties in claims of negligence, as a result of professional services delivered. Note: Even if you cannot be held responsible, you may still be required to mount a costly legal defence, and PI Insurance can cover this expense.
If one or more of these apply to you or your business, PI Insurance is vital.
How long do you need to hold PI Insurance?
Even if a contract is finished, or you are no longer working, there is often an ongoing need for PI insurance – even after contract completion.
It is a common requirement stipulated in many contracts, that you must hold PI Insurance for a set period of time after the scope of works in a contract have been completed. If this is the case for you, it’s important to retain PI cover, even once you have completed works. This will ensure you do not breach contractual conditions.
Contract requirements aside, PI claims can still come to light many years after delivering your services, making it important to maintain cover for an extended period. Why? PI Insurance is what’s known as a ‘claims made’ insurance policy. This means that to be insured, you must have PI Insurance in place at the time of claim notification. It does not matter whether you had a policy in place at the time you performed the work, if you don’t have coverage in place at the time of claim notification, you would not be covered for any damages sought against you.
For more detail on why not to cancel PI insurance due to ongoing risk exposures – click here
If you do decide to cancel your PI insurance, Run-off cover is essential to maintain financial protection against any ongoing risk exposures – read more on Run-off cover by clicking here.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
T: 1300 854 251
E: info@enginsure.com.au
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.
