A person becomes liable for damage to any property or person caused by the services offered by his business. For providing professional service or advice, a person can face claims of negligence or breach.

Under professional indemnity insurance ‘Indemnity’ is defined as follows:

An indemnity includes claims arising due to the losses or the damages made against the insured. These losses or the damage made against the insured occur during the period of insurance policy.

Read More: What is Extended Claim Reporting Clause in Professional Indemnity Policies and How does it work?

The insured in this case is secured against any breach of professional duty due to any act of negligence, error or omission.

Read more about it’s claiming procedure

The act of negligence, error or omission may be committed by:

  • The insured
  • The predecessors in business of the said firm
  • Any person employed by the insured

Indemnity applies when any claim is made in writing against the insured during the policy period of professionalProfessional Indemnity Insurance indemnity insurance. The insurance company is not liable for any claims made against the insured for an act committed or alleged to have been committed before the retroactive date as mentioned in his insurance policy. A retroactive date is a date on which the insured’s professional liability coverage begins.

Policy period and period of insurance play a major role in determining indemnity. As the period of insurance forms an important part of indemnity it is essential to define it properly. Period of insurance is the period commencing from the retroactive date and terminating on the expiry date as mentioned in the insurance policy.

Read More: How is Insurer’s liability decided under Professional Indemnity Insurance?

Policy Period’ is the period beginning on the effective date and hour and ending at midnight on the expiry date. The beginning and ending date is mentioned in the schedule of the insurance policy taken.

Case: 1

Gautam and Anita were married since last 55 years. They had a daughter named Sheela who was 28 years old. On the 55th marriage anniversary of the couple, they decided that they will make their respective ‘Will Agreements’ and secure their daughter’s future. For getting work started on their will agreements, they approached a law firm owned by Mr. Sinha. The couple gave Mr. Sinha a deep insight into their property and asked him to start the process.

After two days, Anita approached the law firm and told Mr. Sinha to make her will separately and transfer her maternal property to her birth child which she had when she was a teenager. Her husband, Gautam had no clue about this son, and hence she told Mr. Sinha to keep this information confidential until her death.

One-day Mr. Sinha passed away due to heart attack, and all his work was left to his junior staff member to complete. As the junior staff member had no idea to keep Anita’s will agreement confidential, he sent out both the agreements to Gautam.

Anita’s secret was out, and it created havoc in her marriage. This entire situation took a toll on Anita and caused her considerable distress. Anita filed a complaint in writing against the law firm for breach of her confidential information.

Mr. Sinha had taken a professional indemnity insurance policy which saved the law firm against the claim.

Case:2

Arun, a 30-year-old individual was in tiffin service business for three years. His business had prospered and word of mouth led to more and more business. Arun decided that he will also start an online tiffin delivery service. He gave the project of his website designing to a graphic designer. After the instruction given as per Arun’s requirements, the graphic designer began with the project. After 15 days, the website was designed and handed over to Arun.

Arun now handled his business by taking online requirements of tiffins services as well. After some days, Arun received a notice from a firm about unlicensed use of their tiffin images on the website. Arun immediately sued the graphic designer for his negligence and loss. The graphic designer had bought a professional indemnity insurance policy. He approached his insurance company. The matter was investigated and the claim was settled.

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