Professionals who provide legal advice and services like advocates and solicitors, Accountants that provides taxation and audit services, Chartered Secretaries who provide secretarial services for businesses, Professional Valuers and Appraisers who give professional valuations and consultations on assets and properties, Doctors and Surgeons who provide consultations and treatments are the traditional professions that have insured themselves with Professional Indemnity Insurance. Â Other name for it is Professional Liability Insurance.
In today’s world, even the IT consultants such as Web designers, Web Hosting providers, software developers, Insurance Intermediaries such as Â Insurance Agents and Brokers, Real Estate Agents, Â and Marketing consultants such as publishers, advertising agents and public relation companies are the non-traditional professionals that are taking up Professional Indemnity Insurance to protect themselves against financial loss arising from being sued by clients for the wrongful act or negligence or breach of contract.
Therefore, if you are looking for Professional Indemnity Insurance to protect your financial interest, you can choose the most appropriate package of Professional Liability Insurance that offers the following benefits.
Scope of Cover
It should protects the insured professional against legal liability to pay for damages to persons who sustained financial loss as a result of their own professional negligence or those committed by their employees in the conduct of business.
In the example of insurance agent, it could be the error and omission act of the agent in failing to disclose the the actual terms of policy coverage and benefits to clients or error in disclosure of personal details of insured in the proposal forms to the insurers which resulted in termination of contract and voided their claims causing financial losses to clients.
The policy can include the indemnity for defense cost and expenses in respect of a claim to which the policy applies.Â The quantum of liability depends on the amount of the value of contracts or the actual financial loss suffered by their clients and the legal fees paid for legal actions and the damages that may become payable to third parties.
Usually, the cover is on “claim made” basis,Â meaning that the policy only covers claims made during the policy period. Â If the Retroactive date is stated in the policy schedule, the policy would cover claims made as a result of negligent act, error or omission committed after the retroactive date.
Example: A lawyer Â had taken a Professional Indemnity Insurance(PII) policy in year 2012 and 2013 with Insurance Company A. However, in 2014, the insurance policy was renewed with Insurance Company B as the insured would have considered the better terms including a Retroactive cover to year 2012 and cheaper premiums offered by the policy of Insurance Company B. Â
An act of negligence by the professional was committed in year 2013 but it only came to the knowledge of the client in year 2014 when damage resulted in severe financial loss to the client and third parties. The client filed a legal action against the professional in year 2014. Since the policy in force is issued by Insurance Company B when the negligence was discovered and a claim is being made in current year(policy period), it is liable to settle all the claims awarded by the Court including the legal cost of defense and expenses incurred. Â
- Dishonesty of Employees
- Libel and Slander
- Loss of Documents
- Retroactive cover
- Dishonesty of Partners
- New Joining Partners and Outgoing or Retiring Partners
- Estates and Legal Representatives
- Consultants, Subcontractors and Agents
- Intellectual Property
- Newly incorporated or acquired entity or subsidiary
- Run Off Cover insured entity or subsidiary
- Joint Venture Cover
Extensions are optional and may be granted with payment of additional premiums.
Mandatory and Excess Layers
For certain professionals like Legal Profession in Malaysia, the Malaysia Bar Council and the statutory requirements made it compulsory for the practicing lawyers and solicitors to carry a mandatory Professional Indemnity Insurance minimum limit of RM250,000 for sole-proprietorship and Â RM50,000 for each and every additional partner of the firm. Â Normally, it is stated in the policy schedule that there is base excess amount in which theÂ insured lawyer must pay for each and every claim made against them before the annual mandatory Professional Indemnity Insurance (PII)policy pay out from its sum insured or limit of liability.
As some lawyers are specialized in certain area of practice, such as criminal laws or laws of probate and administration of estates while others are in civil laws and conveyancing, they may require excess layer or top-up layer to meet the requirement of their clients. Â It is quite common for financial institutions to impose a higher limit of Professional Indemnity Insurance to be carried by the legal firms for its lawyers to be appointed as their panel legal advocates and solicitors. Â This is part of the financial institution’s and lawyer’s risks exposure mitigation plan against financial loss arising from legal actions for higher risks portfolio and higher volume ofÂ Â the legal works done.
Other Professional Institution like The Malaysian Institute of Chartered Secretaries and Administrators or MAICSA Â requires their members who are Public Practicing Secretaries to have Mandatory Professional Indemnity Insurance minimum limit of RM175,000 for renewal of their practice certificates.
Malaysia Institute of Estate Agent(MIEA) also encourages its members to uphold its professional ethics and professionalism in rendering services to the public. Â Board of Valuers, Appriasers and Estate Agents(BOVAEA) together with MIEA, PEPS, Institute of Surveyors Malaysia (ISM)have embarked on registering its certified real estate negotiators and provide them with tags to weed out unscrupulous illegal agents and brokers and stop their activities. Â Real Estate Agents are encouraged to carry Professional Indemnity Insurance as to protect its members and the public.
The amount of insurance Â required by each practising professional may varies according to their risks exposure such as the size of the firm or partnerships, clients base and business turnovers and annual fees collection or the area of practice or the panelship compliance by their clienteles terms and conditions of service Â of professional consultants.
It is best to read and understand each policy offered by the insurance company before you decide on taking up the policy. Â Clients are advised to renew promptly with their Professional Indemnity Insurance so that there is no break in their automatic Retroactive cover.
When you are ready to consider this policy as part of your essential risks management tool, please do contact us for a quote from our panel of leading insurers for Professional Indemnity Insurance.