Professional Indemnity Insurance

Professional indemnity insurance is designed to respond to claims alleging that a business or an individual has caused loss through a negligent act, error or omission in the professional services or advice they provide. It generally covers the cost of defending an allegation as well as damages awarded, subject to the policy.

Annex Risk Advisory is a Perth commercial insurance brokerage. As a professional indemnity insurance broker, we help businesses define what their professional services actually are, review the limits, retroactive dates and wordings they currently hold, and explore options from a range of insurance markets.

Professional indemnity is written on a claims-made basis, which sets it apart from most other classes. A policy generally responds to claims made and notified during the period it is in force, rather than to work performed during that period, so continuity of cover and the retroactive date can matter as much as the limit.

What a policy responds to also varies between insurers. How professional services are defined, whether defence costs sit inside or outside the limit, and whether the limit applies to each claim or in the aggregate all differ.

Reading those terms against the work a business actually performs, and against what its contracts require, is where broker involvement tends to be most useful.

Professional indemnity exposure exists wherever a business provides advice, design, specification or a professional service that others rely on. That includes consultants and project managers, engineers, architects, surveyors and building designers, accountants and bookkeepers, technology and software businesses, recruiters, marketing and media agencies, allied health practitioners, and professional services firms of most kinds. It also applies to construction and infrastructure businesses carrying design responsibility under a contract, including design and construct arrangements.

Some occupations are required to hold cover as a condition of licensing or registration. Australian financial services licensees, credit licensees, registered migration agents, conveyancers, tax agents and a number of health and building-related registrations all carry professional indemnity requirements, and the detail varies by profession and by jurisdiction.

In Western Australia, consultants working into mining, resources and energy projects are often asked for higher limits than the market default, reflecting the value of the assets involved and the contracts under which the work is performed.

More often the requirement comes from a contract. Professional services agreements, consultancy appointments, head contracts and tender conditions frequently specify a minimum limit, and sometimes a period for which cover must be maintained after the work is completed. Limits of $1 million, $2 million, $5 million and $10 million are common in the Australian market.

Where a contract sets those requirements, the policy needs to be read against the agreement rather than assumed to comply, particularly where cover is required to continue after practical completion.

Annex takes a risk-first approach. Before approaching any insurer, we work to understand what the business actually does, what it advises on or designs, who relies on that work, what its contracts require, and what cover has been held previously. Continuity matters on this class, so prior policies and retroactive dates form part of the analysis.

From there we assist with insurance program design and placement, comparing options across a range of insurance markets and looking at how professional services are defined, whether defence costs erode the limit, how the limit applies and what exclusions attach, alongside premium. Whether the limit reinstates, and how multiple claims arising from a single cause are aggregated, are worth checking on this class in particular, because they can change what a stated limit is actually worth.

We can also review the insurance obligations in consultancy agreements, head contracts and tender documents to consider whether existing professional indemnity insurance aligns with them, including any requirement to maintain cover after completion.

If a claim or a circumstance arises, claims management and advocacy is part of the service. Notification is particularly important on a claims-made policy, because a matter that is not notified in the period it becomes known may fall outside cover. We assist with lodgement, documentation and insurer communication, and advocate for assessment under the terms of the policy.

Both directors are active practitioners, so clients deal directly with senior brokers rather than a rotating account team. Cover is subject to insurer approval, policy terms, conditions and exclusions. Annex Risk Advisory is a signatory to the NIBA Insurance Brokers Code of Practice, and our Financial Services Guide and Terms of Engagement are available online.