Professional indemnity

Professional indemnity insurance is a financial product that covers legal costs and damages for professionals accused of negligence, errors, or omissions in their services. US courts reported $1.5 billion in malpractice payouts from 2022 claims, illustrating the risk.

Lawyers, architects, accountants, and consultants frequently purchase professional indemnity policies due to exposure. Claims examples include missed deadlines on contracts, design flaws in buildings, or incorrect tax advice resulting in client loss.

Policy limits commonly start at $250,000 per claim but can exceed $10 million for large firms handling high-value projects. Deductibles often range from $1,000 to $25,000 depending on business size and claim frequency.

Insurers typically exclude coverage for intentional fraud or criminal acts to manage moral hazard. Premiums depend on factors like annual revenue–firms earning over $5 million usually face higher rates–and claim history; multiple claims can double annual premiums year-over-year.

Certificates of professional indemnity are required by state licensing boards in professions such as engineering in California and legal practice in New York. Retroactive cover is available so long as no known issues exist before policy inception; the average retroactive period purchased is five years according to Marsh data.

The insurer investigates all notifications of potential claims within 30 days under most standard US policy wordings, according to the Insurance Information Database.