Price is what you pay. Value is what you get.¹


The principle of Professional Indemnity Insurance is pretty clear. If your business sells knowledge; advice; design; specification or supervision, you may require cover for the services you provide.

But with so many providers offering indemnity insurance — with varying features, benefits and prices (often the most important factor) — which do you choose? And do you know what you’re paying for?


Indemnity insurance under the microscope


There are many details that differentiate the types of insurance available to you, but possibly the most important is the legal wording on which your insurance is based. This wording defines the types of claim that will be covered under your insurance policy and it’s important you properly understand this up-front. Without this understanding you could find yourself without adequate cover when you need it the most.

Civil vs. Negligent wordings


The two main types of indemnity insurance are Civil Liability and Negligence, Errors and Omissions; and like anything else in the world of financial services both have distinct features and rules about what types of claim they can cover.


Negligence, Errors and Omissions
When indemnity wordings were first introduced, they were largely based on the concept of negligence. This type of indemnity insurance would provide cover when it’s shown that:


  1. you own a duty of care to the claimant;
  2. you’ve breached that duty; and
  3. your breach caused loss to the claimant.

So with a negligence wording, you’re covered should a client make a claim against you for a negligent breach of professional duty. But what if cause of the claim included other factors? For example, what if the claim arose from a statement you made during negotiations — one that persuaded the claimant to enter into the contract — which later turned out to be incorrect?


Civil liability wording
Civil liability is broader than cover based on negligence, errors and omissions, in that negligence is not the only thing you’re covered against. Unless specifically excluded from your insurance, civil liability covers you for a host of other scenarios including:


  • defamation such as libel, slander and product disparagement;
  • privacy infringements such as public disclosure of private facts or trade secrets; and
  • copyright infringements such as trademark and intellectual property right disputes.

Broader Civil Liability insurance products — like the one offered by Jelf Professions — could be given a short shrift when compared on price alone, despite us all knowing that price and value aren’t the same thing. But when compared alongside insurance products with negligence wording, many businesses may be at risk of comparing apples with oranges and not getting the cover they need to protect them when they need it most.


Or if you have any further concerns or questions about your business’s insurance requirements, one of our team will be happy to help you. Just pick up the phone and give us a call.

Sources:
 ¹Warren Buffet - www.forbes.com