{"id":1331,"date":"2017-07-25T06:33:32","date_gmt":"2017-07-25T06:33:32","guid":{"rendered":"https:\/\/pamstaging.securenow.in\/insuropedia\/?p=1331"},"modified":"2026-03-26T06:02:48","modified_gmt":"2026-03-26T06:02:48","slug":"how-claim-processed-professional-indemnity-insurance","status":"publish","type":"post","link":"https:\/\/securenow.in\/insuropedia\/how-claim-processed-professional-indemnity-insurance\/","title":{"rendered":"How is Claim Processed in Professional Indemnity Insurance?"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div><p>There are keys terms which are prominent in Professional Indemnity Insurance:<\/p>\n<p>Liability \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 : Responsibility<\/p>\n<p>Legal liability : Responsibilities enforced by law. This can be categorised as civil liability and criminal liability. For the purpose of professional indemnity insurance, only claims falling under civil liability are payable.<\/p>\n<h2 data-path-to-node=\"5\">Key Takeaways<\/h2>\n<ul data-path-to-node=\"6\">\n<li>\n<p data-path-to-node=\"6,0,0\"><b data-path-to-node=\"6,0,0\" data-index-in-node=\"0\">Civil vs. Criminal:<\/b> It is a common misconception that all legal issues are covered. PI insurance strictly covers <b data-path-to-node=\"6,0,0\" data-index-in-node=\"113\">Civil Liability<\/b> (lawsuits between private parties). Criminal acts or intentional non-compliance with statutory laws are excluded.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"6,1,0\"><b data-path-to-node=\"6,1,0\" data-index-in-node=\"0\">The Three-Step Test:<\/b> For a claim to be settled, the insurer must establish: (1) a Duty of Care existed, (2) that duty was Breached (negligence), and (3) an Injury or Property Damage occurred as a direct result.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"6,2,0\"><b data-path-to-node=\"6,2,0\" data-index-in-node=\"0\">Immediate Redirection:<\/b> The moment a professional receives a legal notice or summons, they must &#8220;re-direct&#8221; it to the insurer. Handling it personally or replying without consulting the insurer can jeopardize the entire defense.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"6,3,0\"><b data-path-to-node=\"6,3,0\" data-index-in-node=\"0\">The &#8220;No-Admission&#8221; Rule:<\/b> To ensure smooth processing, never accept responsibility, offer a settlement, or reply to a claim on your own. As seen in the surveyor case, letting the insurer handle the &#8220;out-of-court&#8221; negotiations is the safest path.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"6,4,0\"><b data-path-to-node=\"6,4,0\" data-index-in-node=\"0\">Independent Defense:<\/b> While the insurer typically manages the case, the policyholder is not strictly &#8220;bound&#8221; to the insurer&#8217;s defense team and can arrange their own legal counsel, though this usually requires coordination regarding costs.<\/p>\n<\/li>\n<\/ul>\n<p>For claims falling under civil liability, if there is a prima facie evidence that there has been negligence, only when conditions for existence of duty and care is established, breach of duty is established and also following that breach, injury or damage to property incurred by third party is established.<strong>\u00a0<\/strong><\/p>\n<p>In a case where there is a liability claim arising from the above reasons, the insurance company should be immediately informed. In case any legal summons or notice has been received, these should be re-directed to the insurance company. It is good to know that the policyholder is not bound by the insurance company for its defence in the case and can arrange its own defence.<\/p>\n<p>Read More:\u00a0<a href=\"https:\/\/securenow.in\/insuropedia\/which-professional-services-consider-buying-professional-indemnity-insurance\/\"><strong>Which Professional Services Should Consider Buying Professional Indemnity Insurance?<\/strong><\/a><\/p>\n<p>In order for the claim to be valid, the events leading to the claim should have occurred during the insurance period or retroactive period and the written first claim against the insured should be made during the valid policy period. The policy does not cover claims which have no contractual liability, claims which can be proven to have been occurred through intentional non-compliance of any statutory provision, and also cases of proven slander, loss of goodwill, penalties, fines, false arrest, libel, mental injury, defamation etc.<\/p>\n<p>Further, it is necessary to inform the insurance company as soon as the policyholder comes to know about the circumstances that may lead to a claim. It means, as soon as the insured gets the notification about the claim, it is necessary to forward the claim to the insurer immediately. For the smooth claim processing, it is necessary to avoid the following:<\/p>\n<ul>\n<li>Accept responsibility or liability of the case<\/li>\n<li>Offer or settle the claim without informing or taking the consent of the insurer<\/li>\n<li>Reply to the claim without consulting the insurer<\/li>\n<\/ul>\n<p>Case:<\/p>\n<p>A valuation report for a property was prepared by surveyor for one of its clients who wanted to sell his property. The report was signed by surveyor in his own name which also mentioned his professional qualifications.<\/p>\n<p>The report was given to the client who paid for the report and relied on it, sold his property. However, after a few days, the client came to know that the property was incorrectly valued and therefore, he sued the surveyor.<\/p>\n<p>As the surveyor had a <strong><a href=\"https:\/\/securenow.in\/profession\/doctor-professional-indemnity-insurance\">professional indemnity insurance<\/a>,<\/strong> he approached the insurer to cover the claim as soon as received the notification about the claim. Though, the client\u2019s lawyer insisted on the out of court settlement, the surveyor first informed the insurance company and let them handle the situation. Without the consent of the insurance company, the surveyor neither respond to the claim nor settled the claim on its own.<\/p>\n<p>Due to the incorrect valuation, the client incurred losses and therefore, it was counted under civil liability. As the claim happened during the policy validity period, the insurer accepted the claim intimation of the policyholder.<\/p>\n<p>In determining whether the professional indemnity claim should be settled or not, the insurer considered the following circumstances=<\/p>\n<ul>\n<li>the claim fell under civil liability category<\/li>\n<li>the errors occurred due to negligence on part of the policyholder<\/li>\n<li>the third-party suffered losses or damages due to the errors<\/li>\n<\/ul>\n<h3>Summary Table: Key Terms &amp; Legal Triggers<\/h3>\n<table data-path-to-node=\"3\">\n<thead>\n<tr>\n<td><strong>Term<\/strong><\/td>\n<td><strong>Definition<\/strong><\/td>\n<td><strong>Impact on Insurance<\/strong><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><span data-path-to-node=\"3,1,0,0\"><b data-path-to-node=\"3,1,0,0\" data-index-in-node=\"0\">Liability<\/b><\/span><\/td>\n<td><span data-path-to-node=\"3,1,1,0\">General responsibility for one&#8217;s actions.<\/span><\/td>\n<td><span data-path-to-node=\"3,1,2,0\"><b data-path-to-node=\"3,1,2,0\" data-index-in-node=\"0\">Baseline:<\/b> The starting point of any claim.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"3,2,0,0\"><b data-path-to-node=\"3,2,0,0\" data-index-in-node=\"0\">Civil Liability<\/b><\/span><\/td>\n<td><span data-path-to-node=\"3,2,1,0\">Legal responsibility enforced by law (non-criminal).<\/span><\/td>\n<td><span data-path-to-node=\"3,2,2,0\"><b data-path-to-node=\"3,2,2,0\" data-index-in-node=\"0\">Scope:<\/b> Only civil claims are payable under PI insurance.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"3,3,0,0\"><b data-path-to-node=\"3,3,0,0\" data-index-in-node=\"0\">Duty of Care<\/b><\/span><\/td>\n<td><span data-path-to-node=\"3,3,1,0\">The legal obligation to avoid causing harm.<\/span><\/td>\n<td><span data-path-to-node=\"3,3,2,0\"><b data-path-to-node=\"3,3,2,0\" data-index-in-node=\"0\">Threshold:<\/b> Must be established before a claim is valid.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"3,4,0,0\"><b data-path-to-node=\"3,4,0,0\" data-index-in-node=\"0\">Negligence<\/b><\/span><\/td>\n<td><span data-path-to-node=\"3,4,1,0\">Failure to exercise reasonable care and skill.<\/span><\/td>\n<td><span data-path-to-node=\"3,4,2,0\"><b data-path-to-node=\"3,4,2,0\" data-index-in-node=\"0\">Proof:<\/b> Negligence must be the cause of the third-party loss.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"3,5,0,0\"><b data-path-to-node=\"3,5,0,0\" data-index-in-node=\"0\">Retroactive Period<\/b><\/span><\/td>\n<td><span data-path-to-node=\"3,5,1,0\">A period prior to the policy start date covered by the plan.<\/span><\/td>\n<td><span data-path-to-node=\"3,5,2,0\"><b data-path-to-node=\"3,5,2,0\" data-index-in-node=\"0\">History:<\/b> Events occurring in this window are covered if reported now.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"3,6,0,0\"><b data-path-to-node=\"3,6,0,0\" data-index-in-node=\"0\">Summons\/Writ<\/b><\/span><\/td>\n<td><span data-path-to-node=\"3,6,1,0\">Official legal notices from a court.<\/span><\/td>\n<td><span data-path-to-node=\"3,6,2,0\"><b data-path-to-node=\"3,6,2,0\" data-index-in-node=\"0\">Action:<\/b> Must be immediately forwarded to the insurer.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Further, the insurer also appointed an expert who reviewed all the evidences and paperwork available.<\/p>\n<p>In this case, the insurer found that the policyholder exercised reasonable care and skill while discharging his duties. As the client suffered financial losses by acting on the report submitted by the policyholder, the insurer paid compensation to the aggrieved party. In addition to the compensation amount, the policyholder also incurred expenses in contesting the case in the court, and the insurer covered defence costs as well.<\/p>\n<p>[cta id=&#8221;984&#8243; vid=&#8221;3&#8243;]<\/p>\n<h3 data-path-to-node=\"8\">Frequently Asked Questions (FAQs)<\/h3>\n<h4 data-path-to-node=\"9\"><b data-path-to-node=\"9\" data-index-in-node=\"0\">1. Does the policy cover me if I am fined by a government regulator?<\/b><\/h4>\n<p data-path-to-node=\"9\"><strong>A)<\/strong> No. Most Professional Indemnity policies specifically exclude <b data-path-to-node=\"9\" data-index-in-node=\"131\">penalties and fines<\/b> imposed by statutory authorities. The policy is designed to cover compensation to third parties (clients), not government-mandated punishments.<\/p>\n<h4 data-path-to-node=\"10\"><b data-path-to-node=\"10\" data-index-in-node=\"0\">2. What is &#8220;Prima Facie&#8221; evidence in an insurance claim?<\/b><\/h4>\n<p data-path-to-node=\"10\"><strong>A)<\/strong> &#8220;Prima Facie&#8221; means &#8220;at first sight.&#8221; It refers to evidence that is sufficient to prove a case unless it is disproved. In PI insurance, the insurer looks for initial evidence that negligence likely occurred before they commit to a full defense.<\/p>\n<h4 data-path-to-node=\"11\"><b data-path-to-node=\"11\" data-index-in-node=\"0\">3. Why is &#8220;Loss of Goodwill&#8221; excluded from the policy?<\/b><\/h4>\n<p data-path-to-node=\"11\"><strong>A)<\/strong> &#8220;Goodwill&#8221; is an intangible asset (reputation). Because it is extremely difficult to calculate the exact monetary value of &#8220;lost reputation&#8221; compared to actual financial losses or property damage, most standard PI policies exclude it.<\/p>\n<h4 data-path-to-node=\"12\"><b data-path-to-node=\"12\" data-index-in-node=\"0\">4. Can I be covered for an error I made two years ago if I just bought the policy today?<\/b><\/h4>\n<p data-path-to-node=\"12\"><strong>A)<\/strong> Only if your policy has a <b data-path-to-node=\"12\" data-index-in-node=\"115\">Retroactive Date<\/b> that goes back at least two years. Without a retroactive clause, the &#8220;Claims-Made&#8221; nature of the policy only covers errors that happen <i data-path-to-node=\"12\" data-index-in-node=\"267\">after<\/i> the policy start date.<\/p>\n<h4 data-path-to-node=\"13\"><b data-path-to-node=\"13\" data-index-in-node=\"0\">5. What happens if the insurer finds I intentionally ignored a law?<\/b><\/h4>\n<p data-path-to-node=\"13\"><strong>A)<\/strong> The claim will be rejected. PI insurance is for &#8220;Errors and Omissions&#8221; (accidents and oversights). <b data-path-to-node=\"13\" data-index-in-node=\"167\">Intentional non-compliance<\/b> with statutory provisions is a standard exclusion in almost every professional liability contract.<\/p>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Does the policy cover me if I am fined by a government regulator?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"No. Most Professional Indemnity policies specifically exclude penalties and fines imposed by statutory authorities. The policy is designed to cover compensation to third parties (clients), not government-mandated punishments.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is \\\"Prima Facie\\\" evidence in an insurance claim?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"\\\"Prima Facie\\\" means \\\"at first sight.\\\" It refers to evidence that is sufficient to prove a case unless it is disproved. In PI insurance, the insurer looks for initial evidence that negligence likely occurred before they commit to a full defense.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Why is \\\"Loss of Goodwill\\\" excluded from the policy?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"\\\"Goodwill\\\" is an intangible asset (reputation). Because it is extremely difficult to calculate the exact monetary value of \\\"lost reputation\\\" compared to actual financial losses or property damage, most standard PI policies exclude it.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Can I be covered for an error I made two years ago if I just bought the policy today?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"Only if your policy has a Retroactive Date that goes back at least two years. Without a retroactive clause, the \\\"Claims-Made\\\" nature of the policy only covers errors that happen after the policy start date.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What happens if the insurer finds I intentionally ignored a law?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The claim will be rejected. PI insurance is for \\\"Errors and Omissions\\\" (accidents and oversights). Intentional non-compliance with statutory provisions is a standard exclusion in almost every professional liability contract.\"\n      }\n    }\n  ]\n}\n<\/script><\/p>\n<h4><b>About The Author<\/b><\/h4>\n<p><strong>Amit<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">MBA Finance<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Amit<\/span><span style=\"font-weight: 400;\"> is an experienced insurance professional with 7 years in the industry, specializing in Errors &amp; Omissions Insurance. Writing for SecureNow, he provides clear and insightful blogs and articles to help professionals understand the importance and nuances of E&amp;O coverage. His expertise ensures that readers receive practical advice on protecting themselves from potential liabilities and professional risks. Dedicated to making complex insurance topics accessible, <\/span><span style=\"font-weight: 400;\">Amit<\/span><span style=\"font-weight: 400;\">\u00a0stays updated on industry developments, delivering valuable content that empowers professionals to make informed decisions about their E&amp;O insurance needs.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>There are keys terms which are prominent in Professional Indemnity Insurance: Liability \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 : Responsibility Legal liability : Responsibilities enforced by law. This can be categorised as civil liability and criminal liability. For the purpose of professional indemnity insurance, only claims falling under civil liability are payable. Key Takeaways Civil vs. Criminal: It is a [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_lmt_disableupdate":"no","_lmt_disable":"no","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1074,698],"tags":[203,243],"class_list":["post-1331","post","type-post","status-publish","format-standard","hentry","category-claims-errors-omissionss","category-errors-omissionss","tag-professional-indemnity-insurance","tag-errors-and-omissions-insurance-policy"],"acf":[],"modified_by":"SecureNow","_links":{"self":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/1331","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/comments?post=1331"}],"version-history":[{"count":8,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/1331\/revisions"}],"predecessor-version":[{"id":35956,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/1331\/revisions\/35956"}],"wp:attachment":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/media?parent=1331"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/categories?post=1331"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/tags?post=1331"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}