The compensation claims that a public liability insurance policy covers are compensation claims arising from things that you have done or failed to do. If you dropped something from scaffolding and it injured someone below or damaged their property, any compensation claim arising from that would be covered. Similarly, if you failed to warn members of the public of a hazard and they were injured as a result, any resultant compensation claim would be covered.
However, although public liability insurance covers claims arising out of negligence, it doesn’t cover claims arising out of professional negligence. This means that in certain situations, you would be uninsured if you didn’t have professional indemnity insurance.
What is professional negligence?
Professional negligence differs from standard negligence because it involves errors and omissions in the designs and specifications that you provide. But in the same way that standard negligence can lead to substantial levels of compensation awards, professional negligence can also lead to substantial compensation awards.
If an error or omission in one of your designs or specifications leads to a compensation claim for a serious injury, the compensation claim could easily result in a compensation award of more than £250,000. The final claim settlement figure would be higher, because it would also include any associated costs and expenses such as the claimant’s loss of earnings, as well as the legal fees that were incurred to settle the claim.
So, do I need professional indemnity insurance?
The exclusion of professional negligence in a standard public liability insurance policy only applies to professional activities that were done for a fee or where a fee would normally have been charged. It doesn’t apply where the professional activity was part and parcel of a wider contract.
As an example, if you are asked to build a wall and as part of that project you are required to design the wall in question, any compensation claim arising from a fault in the wall’s design would be covered by public liability insurance because you hadn’t charged a separate fee for the design element of the contract. You would not need professional indemnity insurance for this sort of work.
However, if you are asked to design a wall for someone else to build, any compensation claim arising out of a fault in the design would not be covered by standard public liability insurance because there was a specific fee for the design work. You would need professional indemnity insurance to protect you against any compensation claims that might arise.
You would also need professional indemnity insurance if you provide quotes that include full designs and specifications even if you provide those quotes for free. Even though no fee is involved, the design in the quote is separate from the building work and the client is under no obligation to use you for the building work.
Dealing with professional negligence compensation claims
Professional negligence is a complex area of the law and dealing with compensation claims that allege professional negligence is not easy.
Other than the obvious advantage of the fact that professional indemnity insurance will pay any compensation awarded against you, one other advantage of this type of insurance is the fact that your insurer will have a fully-trained team that specialises in this type of claim that will be able to handle the claim on your behalf.
Unlike employer’s liability insurance which protects you if one of your employees claims compensation from you, professional indemnity insurance is not required by law.
However, your main contractor may make it a contractual condition that you have this type of insurance. Without it, you may not be allowed on site, and your opportunities to work could be restricted.
You may also need professional indemnity insurance because some professional organisations insist that you have it as a condition of your membership.