You did nothing wrong. It still has to be defended.
Professional indemnity funds the defence of a claim that your advice, design or work caused a client a loss, including the claims that turn out to be wrong.
Professional indemnity insurance
Usually includes
Civil liability
Defence costs
Loss of documents & data
Confidentiality & intellectual property
Defamation
Dishonesty of employees
Know your cover
Promise a result and you step outside the policy.
Professional indemnity is the cover for businesses whose product is judgement: advice, a design, a report, a specification, a set of accounts, a piece of code. It responds when a client says your work caused them a loss, and it funds the defence of that allegation whether or not it turns out to be true. What it insures is reasonable skill and care, not a promised result.
It funds the defence
The policy pays to defend a claim whether or not you were negligent. In practice that is most of what it does, because most allegations are argued rather than admitted.
Claims made, not work done
It answers claims brought while the policy is live, whatever date the work was done (the date of the claim decides cover, not the date of the job). That makes continuity of cover the whole game.
Reasonable skill and care
It insures a failure to take reasonable care. Promise a guaranteed outcome in a contract and a claim on that promise can fall outside the policy entirely.
What we cover
What each cover does, and where it stops.
The cover, the conditions attached to it, and the things it typically won’t reach, set out side by side rather than three clicks apart.
Cover
What comes with it
Commonly excluded
Civil liability
The claim that your advice, design or work caused a client a financial loss.
The core of the policy. On a civil liability wording it answers any claim arising from the professional service rather than only a listed set of causes, so which wording you are on decides how wide the cover actually is.
A client who is simply disappointed. Work already in dispute when cover started. Any obligation you accepted beyond reasonable skill and care, which is the fitness-for-purpose problem.
Defence costs
The cost of defending the allegation, including the ones that turn out to be wrong.
Usually the part of the policy that does most of the work. Solicitors, counsel and experts, funded from the point the insurer accepts the notification, whether or not you are eventually found liable for anything.
Your own time, and the disruption of being in a dispute. Costs run up before you notified the insurer. Costs on a matter the insurer has declined to fund.
Loss of documents & data
The cost of reconstituting client records that were in your care.
Covers the work of recreating documents and data held on a client’s behalf, physical or electronic. It answers the reconstruction cost, which is a different thing from the client’s own loss.
The client’s loss from the records being gone, which is a civil liability question instead. Anything arising from a cyber incident, which most wordings now exclude. Records you never held.
Confidentiality & intellectual property
Misusing confidential information, and infringing rights in what you produced.
Commonly written as one extension. It reaches the unintentional use of material you were not licensed for and the disclosure of information you were trusted with in the course of the work.
Deliberate infringement. Patent infringement, normally excluded outright. Anything arising from a licence you already knew you had exceeded.
Defamation
Libel and slander in the course of the professional service.
An extension rather than a core cover on most wordings. It matters most where the work involves reporting on, publishing about or commenting on other people and their businesses.
Anything said maliciously, or knowing it was untrue. Publication outside the professional service. Matters already threatened when cover started.
Dishonesty of employees
A client loss caused by a member of staff acting dishonestly in the work.
Answers your liability to the client where an employee has been dishonest in the course of the professional service. It is written narrowly and it is not a substitute for a crime or fidelity policy.
Your own money, which is a crime or fidelity policy. Acts of a director or partner, on many wordings. Losses discovered outside the wording’s reporting period.
Subcontractors & consultants
Your liability to the client for work you passed to somebody else.
Your liability to the client normally stays yours whoever did the work, so the exposure sits on your policy. It covers you for their work. It does not cover them.
The subcontractor’s own liability, which needs their own policy. Work outside the activities you declared. Any recovery against them, which is a separate matter again.
Run-off cover
Cover that continues after you stop, for the work you already did.
Because the policy is claims made, the cover has to outlast the work. Run-off keeps a policy live after a practice closes, a partner retires or a business is sold, for a period the insurer agrees rather than indefinitely.
Any new work done once run-off has started. Matters you already knew about at the point of closure. Periods where cover had lapsed before the run-off began.
Cancel the policy and you cancel the cover for work you already did.
Professional indemnity answers claims brought while it is live, whatever date the work was
done. Stop the policy and last year’s work stops being covered along with it. That is what
run-off exists for, and it is worth arranging before you need it rather than after.
Words you’ll see
Six terms that decide whether it pays.
Claims made
The policy answers claims brought against you while it is live, whatever date the work was done. It is the opposite of how most business insurance works, and it is why letting a policy lapse can leave finished work uninsured.
Retroactive date
The earliest date of work the policy will reach. Work done before it sits outside cover however long you have been insured since, which is why a gap anywhere in your history can leave a permanent hole.
Run-off
Cover kept in force after you stop trading, so a claim about old work still has a policy to be made against. It is bought for a set period rather than for ever.
Any one claim, and aggregate
Two different ceilings. Any one claim applies to each matter separately. An aggregate limit is the most the policy will pay across the whole period however many claims arrive. The second is the easier one to overlook.
Costs inclusive, costs in addition
Whether defence costs come out of your limit or sit on top of it. On a costs-inclusive wording a long defence can consume the limit before any settlement is reached, so the two are not the same policy at the same price.
Notification of circumstances
Telling the insurer about something that has not become a claim yet but might. Most wordings require it, and doing it protects the cover rather than counting against you.
Why Vara
Bespoke service for you & your business,
without the big-firm minimum.
01
Continuity is the first thing we ask about
The retroactive date decides whether the work you did years ago is insured at all. We establish your cover history before we approach anyone, because a gap is not something to find out about at claim.
02
We present the risk properly
Fee income by type of work, the contracts you sign, the sectors you serve and your claims record. How that is described changes what you are offered.
03
Named insurers, not a black box
We place with a published panel and tell you who’s on it. You can see where your risk went and who’s carrying it.
04
We recommend, and we write it down
We set out cover, limits and exclusions, recommend a policy from our panel, and put in writing why we consider it meets your demands and needs, so you can check it. The decision is always yours.
You talk to a person. The machines do the typing.
Alongside this policy
The three that sit next to it.
Cyber & data
Most professional indemnity wordings now carry a cyber exclusion, so a data breach or a diverted payment is a separate policy rather than an extension of this one.
Management liability & D&O
Claims made against a director or partner personally rather than against the business. Different insured, different trigger, separate contract.
Commercial combined
Property, liability and business interruption. Professional indemnity is its own contract and does not usually sit inside a package policy.
Free review of your professional indemnity cover and costs.
Leave your details and we’ll call you straight back. One conversation covers the work you do, your fee income and your claims history.
What the review covers
We go through the policy you have now, so you can see what it does and doesn’t cover against the advice you give and the work you complete.
We point out the terms that catch professional indemnity customers out most often, retroactive dates and run-off cover among them, so you can check yours.
We approach insurers on our panel who write professional indemnity cover, and come back with what they’ll offer.
We explain each option in plain English, including what it doesn’t cover.
If it’s not a risk we can place, we’ll tell you straight away rather than leave you waiting.
No obligation to switch. You decide what fits.
Rather not wait? Call us on 0333 091 3663
Good to know
Professional indemnity questions, answered straight.
What does professional indemnity cover?
What does claims made mean?
What is a retroactive date?
What happens when I stop trading or sell the business?
Why does fitness for purpose matter so much?
Is a cyber incident covered?
Do I have to tell the insurer about something that might become a claim?
What limit of indemnity should I have?
Vara Commercial Insurance · 0333 091 3663
Vara is a trading name of Koral AI Operating Company Limited. Vara is an appointed representative of Innovative Risk Labs Ltd, under Firm Reference Number 1060955. Innovative Risk Labs Ltd is authorised and regulated by the Financial Conduct Authority, under FRN 609155. We are registered in England and Wales under Registered Company Number 17256222. Registered office: 167-169 Great Portland Street, 5th Floor, London, W1W 5PF.