All about Professional Indemnity Insurance

Historically, the word ‘profession’ was associated with the occupations known as the learned professions namely clergy, education, law and medicine. With society developing into a more complex and specialised entity, occupations requiring extensive technical knowledge or training have increased manifold. The domain of professional liability has extended beyond the traditional professions resultantly.

Broadly, professional liability can be defined as the failure to use the degree of skill expected of a person in a particular field. Professional liability insurance, therefore, describes insurance covering liability arising out of the providing of professional services to others.

By law, professionals are required to perform the services for which they were hired in accordance with the appropriate terms of contract. While the first duty is primarily contractual, the second arises from the principle of tort law. A contractual arrangement is created, when a client hires a professional to perform a service. When he fails to perform the contractual obligations as promised and the client suffers harm as a result, the injured party is entitled to be restored to the position he would have occupied had the contract been performed as promised. A tort is a private wrong, as opposed to crime that is a public wrong.

A professional also has a duty to follow a recognised standard of conduct in the course of daily activities. He should use reasonable care to avoid causing injury to his clients in the exercise of such duty. Failure to comply with that accepted standard of conduct will expose a professional to liability for any damage to another person. A wrongful act is established by determining whether a prudent person, in the exercise of ordinary care, would have foreseen that the injury or damage would have naturally or probably resulted from the conduct.

Violation of duty towards a client by a professional can result in a contract action, or a tort action, or both. A breach of contract arises when the professional fails to perform the services agreed to. When he fails to perform as expected either a contract or tort cause of action may arise. However when his performance causes damage or personal injury, a tort action is most likely to arise.

The professional liability coverage needs of different professionals differ according to the possible consequences of their professional acts or omissions. Consequently, professional liability policies differ in the types of loss they cover. The principal consequence of a physician’s negligence is physical or psychological injury to a patient.