Professional Indemnity Insurance (PI) is a type of insurance that provides a firm with protection against the consequences of possible liability to pay damages to third parties for breaches of professional duty in the course of its practise. It therefore protects a firm from financial loss that can not be met from the firms own resources. Protecting both the firm and client and acting as an important public interest function.
The following are different types of business activities that require professional Indemnity Insurance:-
PI cover is compulsory for members of the Institute of Chartered Accountants and the Association of Chartered Certified Accountants. The minimum limit of indemnity required by the ICA is two and a half times the gross fees of the practice for the last financial year, subject to a minimum of £5,000,000 for sole practitioners and £10,000,000 for all others.
With the developments in the construction industry in recent times, along with new legislation affecting the profession such as Housing Grants Construction Regeneration Act 1996, professional indemnity insurance is seen as ever more essential protection for an engineering firms balance sheet. The level of cover is dictated by contract requirements.
PI Insurance is compulsory for all solicitors practising in England and Wales. A firm must maintain qualifying insurance in accordance with the Rules laid down by the Solicitors Regulation Authority. Since 1st September 2000 the market for PI insurance has changed allowing firms to obtain cover from qualifying insurers, previously only provided by the Solicitors Indemnity Fund. There are some compulsory levels of cover as these are as follows:-
PI Insurance is compulsory for members of the Royal Institute of Chartered Surveyors. Cover must comply with the minimum policy wording and be placed with an approved insurer and as a minimum requirement the policy wording should be written on a full civil liability basis with an ‘each and very’ claim basis. RICS minimum limit requirements are: