what is professional indemnity insurance?

[jay82]

Can someone explain what claims are covered by PI insurance and whether it is an employer's responsibilty to provide this insurance coverage to its employees or the employees need to insure themselves? i can understand being a sole practitioner it will be your own responsibility, but in case you work for someone else and the owner doesnt provide insurance coverage,what then?

 

[Andrew46]

From a legal perspective PI insurance covers liability arising from mistaken or negligent advice to clients and third parties, subject to the terms and conditions of the policy which do vary from insurer to insurer.
Normally it would be the firm (i.e. the employer) which takes out the policy. The policy would cover the firm's liability and (normally) that of employees provided their normal function was to give professional advice to the firm's clients.
An employee should not normally be personally liable for wrong or negligent advice. However, it is possible in certain circumstances for an employee to be liable personally if the client or third party relied upon the personal advice of the employee and it was reasonable for him to do so.
I would have thought it would be difficult if not impossible for an employee to obtain insurance in practice.
The position might be different if in reality the "employee" is self-employed and more in a sub-contractual relationship with the "employer".
Is the business one where PI insurance is a professional requirement?

 

[jay82]

im a solicitor but the firm i have recently joined doesnt have a policy for providing insurance cover to its employee. though they encourage employee to insure for themselves. And yes to your question whether this business such which needs insurance. Law firms i believe have the maximum chances of claims possible. thank you for the reply

 

[Andrew46]

I am a little surprised by your reply. I assume you are practising in England and Wales?
The SRA Indemnity Insurance Rules 2011 lay down Minimum Terms and Conditions for PI insurance cover. These require employees to be covered. See Appendix 1 of the rules para. 1.3:
http://www.sra.org.uk/solicitors/handbook/indemnityins/appendix-1/content.page
Therefore your firm's PI cover must extend to employees.
In theory in the event of a claim, this would not prevent the firm suing you for non-insured losses if you were responsible for loss caused to a client due to your negligence. You could ask your firm for an indemnity but admittedly unlikely you would get it.

 

[jay82]

i work in ireland. i have a meeting in HR on monday, i plan to discuss this issue with him. then i will know for sure whether they extend coverage to employees and if not then whats happen in the event a claim is made.

 

[Andrew46]

On a quick look at the rules which apparently are current for the profession in Ireland, it seems that firms must maintain PI cover for partners and employees up to a level of 1.5 million euros. See:
http://www.lawsociety.ie/Documents/committees/PII/2011MTC.pdf
I would check with the Law Society (or young solicitors group if any?) whether there is any policy about principals suing employees for negligence.

 

[jay82]

thanks your posts have been very helpful