Professional Indemnity Insurance In India – An Analysis

Posted on Nov 17 2017 - 12:26pm by Editorial Staff

A medical negligence case has been registered against a doctor with one of the nursing homes in Andhra Pradesh.

This is not the single incidence where a lawsuit has been filed against doctors. In fact, with a rise in the consumer-friendly nature of the legal environment across different countries, professionals from different fields have topay utmost attention in the manner they discharge their duties. Now, the courts have become consumer-friendly towards their approach.

Moreover, in recent times, it is not only medical professionals against whom cases have been filed, but also other professionals like auditors, engineers, architect, lawyers, etc.; have toface legal brunt when cases are filed against them due to their negligence in discharging their profession duties,resulting intolosses to others.

Professionals can protect themselves by way of errors and omissions insurance policy, which is also called professional indemnity insurance.

Errors and omissions insurance policy is an important insurance policy which safeguards the professionals from a series of claims which may arise from negligent performance or due to errors or omissions while discharging duties. This insurance policy has been specifically designed to safeguard such professionals who impart advice and service to their clients.

The policy covers those claims which may arise due to financial losses incurred by customers after trusting these professionals and implementing their services. Professional indemnity insurance is designed towards protecting both the assets and reputation of the professional which may get harmed due to the legal actions were taken by the suffering victims.

Such financial cover may also cover costs involved in defending itself in a court.

What is All Covered Under Errors and Omissions Insurance Policy?

The claim received under errors and omissions insurance policy includes the below expenses –

  • Compensatory losses or damages which may be awarded against the policyholder
  • Settlements
  • Legal expenses which may be associated with defending itself against legal actions

Which kinds of entities are covered under claims?

The following are covered under errors and omissions insurance policy –

  • A legal entity and its subsidiaries
  • Past and current principal or director or partner
  • Past or present employees
  • Contractors

Any other entity or person who is acting within the scope of the policyholder’sduties is also covered. For instance, staff like sweepers, peons, etc.; in professional establishments can also be covered under the professional indemnity insurance against errors or negligence, provided they are explicitly mentioned in the policy document.

Further, such insurance policies do not cover punitive or exemplary damages or any kind of third-party public liability or losses which may arise due to war and nuclear perils. Also, the policy will not offer any coverage if the losses occur due to willful neglect or deliberate act or financial losses.

In addition to this, errors and omissions insurance policy will not offer protection in thecase where the services have been rendered under the influence of drugs and intoxicants. Likewise, errors and omissions insurance policy will not provide coverage in case of breach of clauses of confidentiality or suppression of facts. Any such condition can lead to claims rejection.

Further, it is crucial to note that in some cases, there can be a long-time gap between the actual occurrence of the event and the time the claim has been paid. In such cases, it is necessary for professionals to ensure that their errors and omissions insurance policy cover stays activeduring this time as well in order to get their claims settled under the policy.

Why Should One Go for Errors and Omissions Insurance Policy?

In a professional claim, one has to spend a big chunk of money and time-based resources. Also, it entails a lot of damage to the reputation irrespective of whether those claims are proved or not. In order to avoid such claims from arising and avoiding the financial troubles, it is useful to go with errors and omissions insurance policy.

Types of Professionals Covered Under Errors and Omissions Insurance Policy

Broadly, here are some categories of professionals for whom errors and omissions insurance policy is available –

  • Management Consultants
  • Project Managers
  • Designers such as web designers, graphic designers and interior designers
  • Marketing consultants
  • Architects
  • Doctors
  • Life Coaches
  • Accountants and Bookkeepers
  • Engineers

Depending upon different insurance policies offered by insurers, there may be other professionals as well, which may be covered under a professional indemnity insurance policy.

It must be noted that although professional indemnity insurance cover is available to professionals, thiscover is limited to monetary terms only. Security of reputation or goodwill is something which is not covered bythis insurance policy.

About the Author
Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.