Insurance 101
September 2022

Is professional indemnity insurance the same as public liability insurance?

In short, no. It isn’t. Professional indemnity and public liability insurance are both legal covers, meaning you’re protecting yourself and your business against legal threats from clients and third parties. However, there are subtle differences and whether you need one, the other or both does depend on your business activities.

Scales weighing professional indemnity vs public liability.

Professional indemnity insurance is a cover that provides you with legal advice and defence paid for by the insurers if you find yourself facing an unhappy client accusing you of making a professional mistake, being negligent during the course of your business activities or giving the wrong advice.

Public liability insurance is also a cover that provides paid for legal advice and defence but it is for accidental injury, death or property damage claims made against you by your clients, customers, suppliers or members of the public.

Don’t stop reading yet!

It is often assumed by certain professions that all they need to protect themselves against claims of causing an injury is public liability insurance.

That is not quite correct. An injury, property damage or even death can be caused by bad advice.

Let’s take Mike, a martial arts instructor, as an example. He found out some time ago that public liability insurance doesn’t cover certain scenarios.

One of his students decided to practise a newly learnt technique on his flatmate at home. Unfortunately, by doing so he caused a concussion to the flatmate. The student blamed Mike for not explaining properly the consequence of using the technique in full force.

Luckily for Mike, the flatmate decided to not pursue a financial compensation claim but it prompted Mike to review his insurance needs and add professional indemnity to his insurance cover.

Who needs professional indemnity insurance?

Any self-employed person or business that provides professional advice to clients is in need of this cover.

Some easy examples are professions such as solicitors, accountants or public relation professionals. Their advice, if incorrect, can seriously damage a client's reputation or their business.

However, professions that provide manual services such as hairdressers or massage therapists can fall into this category if part of the job is to provide advice. For example a hairdresser may recommend a hair treatment to which the client has a bad reaction and loses hair.

Many think that massage therapists only need public liability cover, however, the intimate settings of a massage can lead to misinterpretation of certain actions or gestures, easily leading to an accusation of professional negligence or misconduct.

How does professional indemnity insurance work?

When you receive a phone call or an email from a dissatisfied client complaining about your service making demands of a refund, rework or financial compensation, you can turn for support to your professional indemnity providers.

They will appoint a legal representative to review the correspondence and take it from there. Usually they guide you through the situation step by step or, if required, take over to act on your behalf.

Their goal is yours - minimise any professional and financial damage to you and your business. All costs and possible compensation is paid for by the insurers up to the policy limits.

Points to remember:

  • If your profession could cause an injury or property damage, check that your professional indemnity covers these risks.
  • You’re only covered if you have an active professional indemnity insurance at the time a claim is made against you. In other words if you cancel your professional indemnity insurance, you are no longer covered even if at the time of delivering work for a client you were insured.
  • Professional indemnity insurance can cover your past work as well. Make sure you specify the required retroactive date when arranging your cover.

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