Many professionals and firms rendering services to clients, particularly operators in the healthcare sector, are carrying huge liabilities as a result of claims associated with negligence and wrong advice given to clients. Nnamdi Duru writes that professional indemnity insurance could help mitigate their burden
Professional Indemnity (PI) insurance, commonly known as Errors & Omissions (E&O) in the United States, is an insurance policy that protects professionals who sell their knowledge and skills from damaging claims from clients who may not be pleased or satisfied with the services provided.
Professionals in various fields and corporations offering certain services do, at one time or the other, have disagreements with their clients who may accuse them of providing substandard services, withholding information or outright negligence.
If found wanting with regard to the quality of service rendered, the professional or corporation is liable and could be asked by the court to pay huge sums of money as damages to aggrieved clients.
Therefore, in order not to be liquidated by such liabilities, the professional or firm takes steps to protect self by seeking professional indemnity insurance, transferring financial liabilities arising in such circumstances to a licensed insurance company.
An insurance professional, Mr. Onyekwere Iwuagwu said professional indemnity insurance applies to individuals and organisations involved in providing services based extensively on personal knowledge and skills. It protects the business against claims for losses by a client or a third party if it makes mistakes or found to have been negligent.
In other words, it is an insurance cover that protects a professional or business from financially crippling and reputation damaging claims by dissatisfied clients.
The benefit of professional indemnity insurance is in three folds. It guarantees peace of mind for the policyholder, provides cover for damages, as well as cover for legal costs.
Having professional indemnity insurance in place means that as a professional one will have peace of mind in terms of his financial future. This cover means that one is not left worrying about what will happen financially if and when a claim for damages is filed against him.
The cover also ensures that damages awarded to clients who filed claims are covered subject to maximum limits and as such, a professional does not have to worry about the cost of damages in the event of a claim.
Also, under the contract, legal costs which at times could be very huge are also covered translating to additional financial security for the policyholder.
Professional indemnity insurance takes care of claims brought against the policyholder as the insurer is expected to conduct the necessary investigations to ascertain the level of culpability of client before accepting liability.
It also sets professionals free from legal responsibilities in a negligence lawsuit as well as keeps lawsuits down enabling the policyholder to save cost.
Who Needs PI Cover
Professionals and companies rendering services to various clients across the globe definitely need professional indemnity cover. They include accountants, architects, surveyors, solicitors, business and management consultants, engineers and estate agents.
The others are doctors, pharmacists and nurses, as well as information technology experts, marketer, advertising and media practitioners, photographers, recruitment and employment agencies, immigration consultants and many more.
Also, many self employed people are buying professional indemnity covers to protect them where they provide advice, support or contract auditing
Extent of Cover
Professional indemnity insurance covers claims against an individual or firm for breach of professional duty but depending on the policy, cover could be extended to misleading and deceptive conduct, defamation of character, infringement on intellectual property rights, damages arising from fraud and defense costs associated with claims.
Insured amounts could vary depending on the level of risk to which the policyholder is exposed. If you think of some project disasters, these sums are not unreasonable.
An individual or firm needs professional liability insurance simply to ensure that claims for damages do not result in liquidation, distress or serious financial stress. Such claims may go beyond the payment of damages to legal costs.
Professional Indemnity for Healthcare Operators
Between 1987 and 2004, 56 insurance products were made compulsory by means of statutory provisions in the country. One of these is the professional indemnity for healthcare services providers.
Section 45 of the National Health Insurance Scheme (NHIS) Act, 1999 provided that “a healthcare provider (medical centre, institution, professional) shall be required to take a professional indemnity cover from an insurance company approved by the council.”
The Federal Government reasoned that being humans, health professionals may make costly mistakes innocently or negligently in the course of diagnosing ailments, prescribing and administering drugs on patients, carrying out surgery and other treatments. When this happens, the patient may suffer irreversible damages to his health and in severe cases lose their lives.
If this happens, the victim or his relatives may drag the professional who handled the case to court demanding huge sums of money as damages. In most cases, it is either the individual or his organisation may not be in a position to pay the damage or may be distressed financially after paying off the liability.
No matter the situation, the victim should not be denied compensation for the pain, sufferings and loss of vital organs inflicted on him as a result of the error committed by a health professional.
Unfortunately, this aspect of the NHIS enabling law is the most violated by stakeholders in healtcare services across the country. Many healthcare operators under the scheme are not even aware of this aspect of the law which made it compulsory for them to be insured on duty.
That is why the National Insurance Commission (NAICOM) decided to enforce this aspect of the NHIS law alongside four other compulsory insurances under it Market Development and Restructuring Initiative (MDRI).
An insurance expert, Mr. Lanre Laoshe, confirmed that the insurance regulator is currently enforcing the compulsory professional indemnity insurance for health management organisation (HMOs) under NHIS.
It is very important to stress that the insurer will only respond to claims made while the policy is live. This means the service provider must be insured both at the time the liability arose (when the advice was provided) and at the time of the claim.
The implication of this is that if problems arise long time after services were rendered, the policy holder may run into trouble if he is no longer under cover. It also means that the policyholder should also consider renewing the policy long into his retirement and when changing his insurer, he needs to ensure that the new insurer agrees to carry liabilities that arose before it takes on the risk.
Also, professional indemnity insurance does not cover the full range of risks to which a business may be exposed and as such, the professional needs to seek advice from qualified and experienced insurance agent or broker to ensure he gets the right cover.
Before Shopping for Cover
Every professional should ask himself if he can afford to pay the premium for the professional indemnity insurance or better still ask himself if he can afford not to buy it.
Iwuagwu advised professional to consider their finances before searching for a professional indemnity cover to enable him work out his budget and determine the maximum cost of premium he can pay. Having done that, he should limit himself to insurance plans that are affordable within his budget and of high quality.
The professional should also ensure that he is happy with the features and details of any plan he chooses because one should not sacrifice the quality of cover just because it is affordable.
Also, the policyholder should see the cost of professional indemnity insurance not as an expense but as an investment in the financial security and future of your business.
However, professionals must not give clients reasons to make claims against them by keeping up to date with current requirements, especially legal ones, in the fields where they provide services.