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Professional Indemnity Insurance in South Africa – Are They the Answers to Your Liability Cover?

One of the areas of greatest confusion is the difference between Professional Indemnity, General Liability and Product Liability Insurance. Professional Indemnity Insurance provides coverage for professionals (corporate or individual) for any negligent act, error or omission alleged to have occurred while in the performance of their professional activities and duties. It differs from General Liability and Product Liability Coverage in that the acts covered are those acts performed by an engineer, architect, doctor or attorney in rendering professional services to their clients. To better understand this coverage we will have a brief discussion below of Product Liability, Professional Indemnity and the application of the latter and how it functions.

How Much Is Indemnity Insurance

A. Product Liability

Product Liability is the legal responsibility of a manufacturer to a consumer of its’ product. Liability arises out of the negligent manufacture of a product including defective or faulty workmanship, materials or components. It is a liability that arises from the failure of a manufacturer to properly manufacture, test or warn about its product and occurs when the product departs in a negligent manner from its intended function.

Professional Indemnity Insurance - Does it Help?

Professional Liability Insurance

Professional Indemnity Insurance is designed to protect your business against any claims arising from negligence advice or services. It covers for people working for a business that involves risk.

Professional Indemnity Insurance policies are purchased by business owners to protect their companies from financial liability in case of claims of negligence. The individual under this is at the same time provided with assistance by Professional Indemnity Insurance when fighting lawsuits. Professionals like accountants, engineers and architects can choose several types of this insurance plan and make their business well protected.

However a professional can be granted or denied by an insurer upon applying for a Professional Indemnity Insurance for several reasons. These factors may include business locations, claims history, industry and coverage amount. The degree of risk reflected by the premium amount is determined by these factors. The insurance company will raise the premiums if a professional is granted a policy but poses a higher risk than standard applicants.

Professional Indemnity Insurance - Does it Help?

What Is Professional Indemnity Insurance

Business liability insurance is tailored to protect your business against the cost of litigation and claims resulted from third party damages or bodily injuries caused due to negligence of your business. With respect to liabilities that a business can face, there are three main types of business liability insurances - public liability insurance, product liability insurance and professional indemnity insurance.

The above mentioned business insurance types differ from one another, but have their own importance in protecting the business from liabilities. Hence, it is very important for businesses to safeguard their investment and consider the three policies based on the type and need of their business. Before deciding on what to take, understand the differences between them.

Public liability insurance
Public liability insurance protects the insured against the third party claims that are likely to be raised due to damage to property, bodily injury or death occurred because of operation of the business.

Deciding the right package of business insurance is quite hard. You should, however, see to it that you purchase insurance to cover every aspect of the risk involved in your business. The most common insurance cover includes product liability, public liability and professional indemnity insurance. All three policies are different from each other, but they are intended to protect your business from different risks of claims and liabilities. Hence, ensure that you have proper cover for your business against possible liabilities.

Professional Indemnity (PI) Insurance Market

How Much Is Indemnity Insurance

Where are we now - and the future?

The Professional Indemnity (PI) market is currently in its soft phase, with insurers still placing emphasis on volume at the expense of profit.

And what of the future? It is certain that at some stage the market will enter harder conditions. There is uncertainty as to when the market might harden and by how much. Invariably the deeper and more prolonged the soft market the more pronounced the adjustment will be when it comes.

Events in insurance, as in life, are powerful and unpredictable. What future events might conspire, individually or collectively, to prompt a return to harder market conditions? The following is a list, by no means exhaustive, of the likely culprits:-

Griffiths & Armour Professional Risks acts as manager for the professional indemnity division of Griffiths & Armour.

Griffiths & Armour Professional Risks Ltd is an appointed representative of Griffiths & Armour which is authorised and regulated by the Financial Services Authority.

All rights reserved. This document does not present a complete or comprehensive statement of fact or the law, nor does it constitute legal advice. It is intended only to highlight issues that might be of interest to Griffiths & Armour clients; specialist legal advice may be required where appropriate. Where links to third party websites are provided, we accept no responsibility for their content.