Professional Indemnity Insurance
Mistakes happen. Even the most experienced professionals can make errors or omissions in their work. That’s where professional indemnity insurance comes in.
Quick Summary
- Protects against the financial cost of professional mistakes: If a client suffers financial loss because of your advice, design, or services, Professional Indemnity Insurance covers your legal defence costs and any compensation awarded.
- Claims-made basis & Retroactive Date: Professional indemnity insurance only responds if cover is active at the time a claim is made. We ensure your policy includes the appropriate retroactive cover so you are protected for work performed in previous years.
- Run-off cover is essential when you cease trading: If you close your business or retire, claims can still arise years later. We arrange run-off cover to protect you after the policy ends.
- Many professions have mandatory minimum limits: Solicitors, architects, chartered surveyors, financial advisers and some engineering disciplines face regulatory minimum requirements. We ensure your policy meets them.
If your business offers a service or advice, you should consider professional indemnity insurance as it responds to allegations your business has made an error or omission in the provision of its professional services. The policy covers the costs of legal defence as well as damages in any settlement. Daines Kapp arranges professional indemnity insurance for firms and individuals throughout the United Kingdom, from a first policy through to programmes with layered limits across more than one insurer.
If you are a chartered surveyor or RICS-regulated firm, we have a dedicated page for you: RICS and property professionals insurance, covering the minimum terms your regulator sets. This page covers professional indemnity for every other profession, and the mechanics of the cover itself.
What is Professional Indemnity Insurance?
Professional Indemnity (PI) Insurance protects businesses and individuals who provide professional advice, design, or services against claims made by clients who have suffered financial loss as a result of a mistake, omission, or negligent act. It covers your legal defence costs and any compensation awarded, whether or not the claim against you is ultimately upheld.
Unlike public liability, which responds to physical injury or property damage, Professional Indemnity responds to purely financial or economic loss. Consequently, it is the essential cover for architects, engineers, consultants, solicitors, accountants, surveyors, IT professionals, and anyone else whose expertise a client relies upon when making decisions.
Who Needs Professional Indemnity Insurance?
Professional Indemnity is either legally mandatory or a regulatory requirement across a wide range of professions. Furthermore, many clients and procurement frameworks now require proof of PI cover before appointing any professional service provider. The table below summarises the key cover sections and what they protect.
| Cover Section | What It Protects | Daines Kapp Advice |
|---|---|---|
| Negligent Advice & Errors | Claims arising from mistakes or omissions in professional advice, reports, designs, or specifications that cause a client financial loss. | The most common trigger for PI claims. We ensure the policy description of activities accurately reflects all services you provide. |
| Breach of Duty & Misrepresentation | Claims where a client alleges you failed to meet the standard of care expected of a reasonably competent professional, or made a misleading statement. | Wording matters here. We check that breach of duty is fully covered and not restricted by onerous conditions. |
| Intellectual Property Infringement | Claims that your professional work has inadvertently infringed a third party’s copyright, trademark, or other intellectual property rights. | Particularly relevant for designers, IT developers, and marketing consultants. We confirm this extension is included. |
| Loss of Documents | Costs arising from the accidental loss, destruction, or damage of documents, deeds, or data entrusted to you by clients. | Standard on most PI policies. We check the limit and the definition of “documents” to cover digital files as well as physical records. |
| Legal Defence Costs | Solicitor and barrister fees incurred in defending a professional negligence claim, even where the claim is ultimately dismissed. | We confirm defence costs are covered in addition to the limit of indemnity, not eroded by it. |
Choosing the Limit of Indemnity
Beyond the premium and the choice of the limit of indemnity itself, there are two additional key decisions that further shape the structure of a professional indemnity policy. The first is the basis of the limit. A policy written on an any one claim basis provides the full limit for each separate claim in the year. A policy written in the aggregate provides the limit once, across all claims in the year combined: a second claim shares whatever is left. Two policies with the same headline figure can therefore offer very different protection, and contracts increasingly specify which basis they require.
The second is where defence costs sit. Under a costs in addition wording, legal defence costs are paid on top of the limit, leaving the full limit available for damages. Under a costs inclusive wording, defence costs erode the limit as the case runs, and a long defence can consume a substantial share of the cover before any settlement is discussed. Neither basis is wrong, but a firm should know which it has bought. Unless a contract specifically states whether its required limit applies on an any one claim or aggregate basis, a contract that specifies a limit is usually best read as specifying damages capacity, which points towards costs in addition.
The limit itself should be set from evidence: the limits your appointments and framework agreements actually require, the realistic worst case in your work rather than the average, and the time claims take to arrive in your profession. Our article on how professional indemnity limits work sets the mechanics out in full.
Key Considerations: Claims-Made Cover and the Retroactive Date
Professional Indemnity policies operate on a claims-made basis. This means the policy in force at the time the claim is made responds to the claim, not the policy that was in force when the work was originally carried out. Consequently, it is essential to maintain continuous cover and to understand your retroactive date.
The retroactive date is the earliest date from which your work is covered under the current policy. If your retroactive date is set too late, professional work carried out before that date will not be protected — even if a valid policy existed at the time. We review your retroactive date at every renewal to make sure it accurately reflects the full history of your professional activities.
Run-Off Cover
When a professional retires, winds up a company, or ceases to offer a particular service, the risk of historical claims does not disappear. In many professions, claims can arise years, sometimes decades, after the work was completed. Run-off cover extends the protection of your PI policy beyond its expiry date, ensuring that claims arising from past work remain covered. We advise on the appropriate run-off period for your profession and negotiate the terms on your behalf. Run-off matters most at exactly the moments it is easiest to overlook: retirement, the closure of a company, and the sale or merger of a firm. Our article on run-off cover explains what buyers and sellers each need.
Professional Indemnity in Contracts and Appointments
For established firms, professional indemnity requirements are increasingly stipulated by the contracts and appointment documents under which they work. These documents, and framework agreements alongside them, now routinely specify the limit, the basis of that limit, and an obligation to maintain the cover for a fixed number of years after the work completes. In construction and property, collateral warranties extend those obligations to parties the firm never contracted with.
A contract that demands an any one claim limit is not satisfied by an aggregate policy with the same limit of indemnity; an obligation to maintain cover for years beyond a project needs pricing into the fee; and fitness for purpose language creates obligations that a professional indemnity policy, which responds to a failure of reasonable skill and care, commonly will not pick up. We can help you review the insurance stipulations in your contracts and appointments, and where relevant we can point you towards the complimentary collateral warranty reviews that some insurers offer through their panel solicitors, so that your contracts and appointments are in line with your policy cover before signature. Our article on collateral warranties and professional indemnity covers further details.
Why Choose Daines Kapp for Professional Indemnity?
Professional Indemnity is one of the most technically complex commercial insurance products. Policy wordings vary significantly between insurers, and the difference between a broad and a restrictive policy can only be identified through a careful line-by-line analysis. As an independent broker, we compare wordings, not just premiums, and we advise on the exclusions, conditions, and definitions that matter most for your profession. Furthermore, if a claim is made, we manage the notification process and represent your interests throughout.
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Frequently Asked Questions About Professional Indemnity Insurance
What professions need Professional Indemnity Insurance?
Professional Indemnity Insurance is either a legal requirement or a regulatory obligation for a wide range of professions, including solicitors (required by the SRA), architects (required by the ARB), chartered surveyors (required by RICS), financial advisers (required by the FCA), and engineers. Furthermore, it is standard practice across management consultancy, IT, marketing, recruitment, healthcare, and any other sector where clients rely on professional expertise to make decisions. If your professional error could cost a client money, you need PI cover.
What is the difference between “each and every claim” and “aggregate” limits?
An each and every claim limit means the full limit of indemnity is available for every individual claim, regardless of how many claims are made during the policy year. An aggregate limit means the total payout across all claims in the policy year is capped at the stated limit. Consequently, if you face multiple claims in one year under an aggregate policy, the limit can be exhausted quickly. We advise on which basis is appropriate for your risk profile and ensure the limit is set correctly for your contractual requirements. You should also check whether defence costs are payable in addition to the limit or inside it, which changes the value of the cover.
How is the retroactive date set on a Professional Indemnity policy?
The retroactive date is typically set to the date your first PI policy was taken out — or, in some cases, the date you started providing professional services. When you switch insurers, it is essential to ensure the new insurer agrees to cover your full professional history from the same retroactive date. Failure to carry the retroactive date forward creates a gap in cover for historical work. We manage this process at every renewal and when switching markets.
Do I need run-off cover when I retire or close my business?
Yes. Professional negligence claims can take years to emerge — particularly in construction, legal, and financial services. When you retire or close your business, the annual PI policy lapses and historical claims become uncovered unless specific run-off cover is in place. Run-off cover extends the claims notification period, typically for between two and six years. We advise on the appropriate period for your profession and arrange the cover before the active policy ends.
Can I get Professional Indemnity Insurance if I have had a previous claim?
Yes, in most cases. However, a claims history does require careful presentation to insurers. The nature of the claim, its cause, the amount paid, and the steps taken to prevent recurrence all influence how underwriters assess the risk. As an independent broker, we have access to specialist markets — including Lloyd’s of London syndicates — that consider businesses with prior claims, and we help you present your risk in the most favourable light.
Does Professional Indemnity Insurance cover cyber incidents?
Standard Professional Indemnity policies cover claims arising from professional errors — including errors in data handling that result in financial loss to a client. However, PI cover does not replace dedicated Cyber Insurance, which responds to first-party losses such as ransomware, business interruption from a cyberattack, and the costs of notifying affected individuals under GDPR. Consequently, businesses that handle significant volumes of client data should consider both covers. We can arrange them together as part of a coherent commercial insurance programme.
