Part of an electrician’s job will involve producing designs and specifications. If there is a problem with these and someone suffers a loss as a result, a compensation claim could be made against the electrician who had been professionally negligent.
Because electricity is dangerous, if something goes wrong, there is the potential for it to be a serious problem. Someone could be electrocuted, or a fire could start. As such, it’s quite possible that any compensation claim that arose would be substantial. Being insured against such compensation claims is vital.
So, how can an electrician insure themselves against such compensation claims?
Public liability insurance
Electricians public liability insurance protects businesses if a compensation claim is made against them because someone who has been injured or had their property damaged feels you are responsible for their loss.
As well as covering any compensation awarded, this type of insurance also covers and associated costs and expenses including the legal fees. Your public liability insurer will also handle the claim on your behalf so you wouldn’t have to deal with solicitors or complex legal arguments.
However, the cover provided by a Tradesman Saver public liability insurance policy is limited if the compensation claim arises due to professional negligence.
Professional indemnity insurance
Public liability insurance only covers compensation claims arising out of professional negligence if the design or specification that was defective was produced was incidental to the main job. If you are asked to rewire a house, working out what cables to use is incidental to the rewiring work, so any claim arising because you used the wrong cables, would be covered.
However, any compensation claims that arise from defects in designs and specifications that you have produced for a fee would not be covered, because public liability insurance excludes cover for claims arising through professional negligence.
Even if you’ve not actually charged a fee, if the designs and specifications are provided in a situation where a fee would normally have been charged, they are treated in the same way and any claims arising would not be covered by public liability insurance.
You would need a professional indemnity insurance policy to cover you against such claims being made against you.
Do I need professional indemnity insurance?
Whether you need professional indemnity insurance depends on the nature of your business. If you’re simply working on design and fit/install contracts where the designs and specifications are incidental to the contract, public liability insurance should be adequate cover for you.
If you are producing designs and specifications as part of the quote process you should consider professional indemnity insurance because the potential client could give those designs and specifications to a different electrical contractor to get the work done. If injury or damage resulted from a defect in those designs and specifications, you would be legally liable rather than the electrical contractor that did the work, but any compensation claim would not be covered by your public liability insurance.
If you are producing designs and specifications on a stand-alone basis, you definitely need professional indemnity insurance to protect you.
It should be noted that professional indemnity insurance operates on a “claims made” basis. Unlike public liability insurance where the policy that is in force when the injury or damage occurs is the one that handles the claim, with professional indemnity insurance it is the policy that is in force when the claim is made against you that handles the claim.
Because compensation claims can be made against you several years after the injury or damage has occurred, this means you should continue your professional indemnity insurance, even if you cease trading. Some insurers will allow you to buy an extension to cover any claims that are made against you once you have ceased trading for a one-off premium.