Liability Insurance

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We all make mistakes, after all; we are human beings. However, not all humans are forgiving, especially when it is about their money. If you, as a business service provider, cause damage, harm or financial loss, to your client due to errors of judgement or inadequate services, then you can be sued by the client for compensation. This is where professional indemnity insurance can come to your rescue.

The effectiveness of professional indemnity insurance can be understood by the fact that the policy provides you coverage if any of your clients claims that he/she has incurred losses by acting upon your advice. The policy offers protection against loss or financial burden which could arise from a range of scenarios like loss of documents, negligence, unintentional breach of copyright, etc.

The professional indemnity insurance, which is also called errors & omissions insurance policy, offers ‘indemnity’ if a company commits a professional mistake. The insurer also covers legal expenses which are incurred by the company in defending itself in the court. In case, the verdict goes against the policyholder; the insurance company pays compensation to the client.

Effectiveness of a Professional Indemnity Insurance

Usually, businesses are often sued because of the mistakes which they make. In case a client files a legal suit, the company could suffer losses which could be hard to recover. As a result, it becomes essential for every company and professional to have errors & omissions insurance policy. This insurance policy comes handy by allowing professionals to provide services to their clients without thinking about the possibility of professional negligence or errors.

Thanks to professional indemnity insurance policy, you can enjoy the following benefits-

Lower risk: As a professional, you do not have to worry about paying for legal expenses from your pocket for unintentional mistakes which you make as the insurance is there to cover it. It allows professionals to do business without worrying about potential errors which could cost them.

Read More: How much Doctor’s Professional Indemnity Insurance Costs?

Build trust: Errors & omissions insurance policy acts as a viable marketing tool. Clients know that if you make any error, you will take adequate steps to fix them. Having this insurance policy in place ensures that you will take full responsibility for your actions and this, in turn, would help in winning the trust of clients.

While professional indemnity insurance plays a crucial role in covering you against professional errors and negligence, there are some instances when the policy will not offer coverage, like:

  • Claims arising out of contractual liability
  • Fines and penalties rendered under the influence of drugs
  • Liabilities arising out of terrorism, criminal acts, etc.


Since, 1999, K.S Software has established itself as a leading player in the IT Market. Last year, X Automobiles hired K.S Software to prepare a database of its customers, which included the name, address and age of its customers along with other personal information. The automobile company wanted to use the database to connect with its old and new customers and inform them about its latest cars.

Though K.S Software developed the database within the deadline; there were some serious issues with it. Like, names and mobile numbers of customers were recorded incorrectly. As a result, whenever the customer executive of the automobile company tried to contact the customers, the phone call always landed on the wrong number.

Read More: What is Run Off Cover in Professional Indemnity Insurance?

Due to this error, the call center team had to check and correct all its customers numbers manually and the entire process took 15 days to complete. Also, many employees had to work overtime as well. Now, the automobile company filed a case against K.S Software for professional negligence.

Luckily, the software company had a professional indemnity insurance policy, and the company approached the insurer as soon as it received a legal notice. The insurer thoroughly inspected the situation and found out that the mistake occurred unintentionally.

As the verdict was given against K.S Software, the insurer came forward to pay compensation to the automobile company. Also, the insurer paid those legal expenses which were incurred by K.S Software in defending itself in the court.