Insurables — Australian business risk, sourced and dated
Cover type

Professional indemnity insurance: what it covers and who carries it

Cover for legal liability arising from professional advice or services, written on a claims-made basis.

Data as at · refreshed by scripts/seed-graph.mjs

In short

  • Professional indemnity responds to a financial loss somebody suffers because of the business’s advice, design or professional service.
  • It is written on a claims-made basis, which makes the date a claim is notified more important than the date the work was done.
  • The claims-made structure is why cancelling a policy can leave past work unprotected.

Professional indemnity covers the failure of a service rather than the failure of a thing. Where public liability asks what the business damaged, professional indemnity asks what the business got wrong, and what it cost the person who relied on it.

It is the core cover for consultants, designers, allied health practitioners, bookkeepers, brokers, engineers and anyone whose work product is an opinion, a plan or a recommendation.

Also called: professional indemnity, PI insurance, PII, errors and omissions

The claims-made structure, and why it dominates everything

Most business insurance responds to events that happen during the policy period. Professional indemnity responds to claims first made against the business during the policy period, regardless of when the work was done.

That single difference drives the rest of the cover. Continuity matters more than any individual policy year, because the policy in force when the complaint arrives is the one that answers, and it will only look back as far as the retroactive date allows.

  • The retroactive date sets how far back the policy will reach
  • A gap between policies can strand work done in the gap
  • Cancelling cover leaves past work without a policy to notify against
  • Run-off cover is the mechanism for a business that has stopped trading

What counts as a professional service

The policy schedule defines the professional business, and that definition is the boundary of the cover. A consultant who has broadened into a related field, or a practitioner who has added a new modality, has changed the risk the insurer described.

Telling the insurer what the business actually does now is unglamorous and is the single most useful thing a professional can do about this cover.

What people get wrong about it

The first error is treating professional indemnity as interchangeable with public liability. They answer different questions, and a contract asking for one is not satisfied by the other.

The second is assuming that stopping work stops the exposure. Claims can arrive years after the advice was given, and it is the absence of a current policy, not the age of the work, that leaves a business exposed.

The third is believing that being right is a defence against cost. Defending an unfounded allegation of professional failure is expensive, and defence costs are a large part of what the cover buys.

Questions

What is a retroactive date?
It is the earliest date of past work the policy will respond to. Work done before that date is outside the cover, even if the claim arrives while the policy is current. Continuity of cover is what keeps a retroactive date early.
I have retired. Do I still need professional indemnity?
Because the cover is claims-made, a claim about past work needs a policy in force when it is made. Run-off cover exists for exactly this situation. Whether it is worth holding, and for how long, is a decision to take with somebody licensed to advise.
Is professional indemnity the same as medical malpractice?
They overlap and are frequently written together for health practitioners. Professional indemnity responds to the advice and the service; malpractice cover responds to liability arising from clinical treatment. Which section answers depends on the wording.

Clauses that turn up in this cover

  • Aggregate limit — The maximum an insurer will pay for all claims in a period of insurance, as distinct from a per-claim limit.
  • Run-off cover — Professional indemnity cover maintained after a business stops trading, for claims arising from past work.
  • Retroactive date — The earliest date of past work a claims-made policy will respond to.
  • Claims-made basis — A policy that responds to claims first made during the period of insurance, regardless of when the work was done.

Occupations that commonly carry it

Ordered by how central this cover is to each occupation in the graph. A pattern in the data, not a statement that any business is required to hold it.

  • Building inspectors — Pre-purchase, stage and defect inspections, reporting on the condition of a building.
  • Surveyors — Cadastral and construction setting-out surveys, and the plans that depend on them.
  • Accountants — Preparation of accounts, tax returns and advice for businesses and individuals.
  • Bookkeepers — Day-to-day transaction processing, payroll and activity statement preparation.
  • Business consultants — Advice to owners on operations, growth and process, priced on the advice itself.
  • Management consultants — Strategy, organisational and change advice to larger clients under formal engagements.
  • IT consultants — Advice, implementation and managed support for business technology.
  • Software developers — Custom software and application development delivered under contract.
  • Web designers — Design and build of websites and online stores, often holding client data and hosting.
  • Architects — Registered architectural design, documentation and contract administration.
  • Consulting engineers — Structural, civil and services engineering design and certification.
  • Draftspersons — Technical drawing and documentation for building and manufacturing work.
  • Quantity surveyors — Cost planning, measurement and progress certification on construction projects.
  • Project managers — Client-side management of projects, programmes and delivery teams.
  • Town planners — Planning advice, applications and submissions to consent authorities.
  • Building designers — Residential and light commercial design outside the registered architect pathway.
  • Real estate agents — Licensed sale and leasing of property on behalf of owners.
  • Property managers — Management of rental property, tenancies and trust money on behalf of landlords.
  • Strata managers — Administration of owners corporations, including insurance placement and levies.
  • Mortgage brokers — Credit assistance and loan placement under a credit licence or as a representative.
  • Financial planners — Personal financial advice provided under an Australian financial services licence.
  • Lawyers — Legal advice and representation delivered by an admitted practitioner.
  • Conveyancers — Licensed transfer of property title and the trust accounting that goes with it.
  • HR consultants — Employment advice, policy and investigations for employer clients.
  • Translators and interpreters — Translation and interpreting services where an error changes the meaning of a document.
  • Virtual assistants — Remote administrative and support services delivered under contract.
  • Travel agents — Booking and packaging of travel, holding client money ahead of departure.
  • Physiotherapists — Registered physiotherapy assessment and treatment in clinic, home and hospital settings.
  • Chiropractors — Registered chiropractic assessment and manual treatment.
  • Osteopaths — Registered osteopathic assessment and manual treatment.
  • Massage therapists — Remedial and relaxation massage, in clinics and mobile.
  • Psychologists — Registered psychological assessment and therapy.
  • Counsellors — Talking therapies and support delivered outside the registered psychology pathway.
  • Occupational therapists — Registered functional assessment, equipment prescription and home modification advice.
  • Speech pathologists — Assessment and therapy for communication and swallowing.
  • Podiatrists — Registered foot and lower-limb assessment and treatment, including minor procedures.
  • Dietitians — Nutrition assessment and dietary advice for clinical and general clients.
  • Disability support workers — Personal and community support delivered in the participant’s home and community.
  • Support coordinators — Coordination of NDIS plan supports and connection to providers.
  • Aged care providers — Approved home and residential care for older people.
  • Nursing agencies — Supply of registered and enrolled nurses to facilities and homes.
  • Dentists — Registered dental practice, including surgery and prosthetics.
  • Veterinarians — Registered veterinary treatment of animals in clinic and on farm.
  • Naturopaths — Natural therapies and nutritional advice outside the registered health professions.
  • Acupuncturists — Registered acupuncture and Chinese medicine practice.
  • Graphic designers — Brand, print and digital design work delivered as artwork and files.
  • Marketing consultants — Campaign strategy, media buying and content services for client brands.
  • Copywriters — Written content and advertising copy produced to a client brief.
  • Interior designers — Interior specification, documentation and procurement for homes and workplaces.
  • Training providers — Delivery of accredited and non-accredited training to workers and businesses.
  • Tutors — Private and small-group tuition delivered in homes, centres or online.
  • Photographers — Commissioned photography on location and in studio, carrying valuable equipment.
  • Videographers — Video production and filming, on client sites and in public places.
  • Childcare providers — Approved education and care of children, including family day care.
  • Locksmiths — Installation, repair and opening of locks and access hardware, including after-hours callouts.
  • Security system installers — Installation and maintenance of alarms, cameras and access control.
  • Personal trainers — One-to-one and small-group fitness instruction in gyms, parks and homes.
  • Gym operators — Operation of fitness facilities, including unstaffed access hours.
  • Yoga and pilates instructors — Class-based instruction in studios, halls and outdoors.
  • Sports coaches — Coaching of individuals and teams, frequently involving minors.

How it is evidenced

Sources