D&O vs. Professional Indemnity Insurance
In any professional setting, it is not unheard of that a client and a hired professional or business may not always agree with each other in terms of the work delivered. Sometimes it’s just a matter of professionals simply making a mistake. Sometimes a client may be too demanding and allege that a business provided inadequate service or advice. If the client suffers a financial loss due to a business or professional’s negligence, the client would have every right to sue the business or the professional and the latter in turn would need to cover for the legal costs as well as compensate the client for the mistake.
During these times, a typical liability insurance wouldn’t be the appropriate type of insurance to have. Liability insurance responds to situations in which an employer receives an injury while at work or property damage among other things. But when it comes to a service or product promised by a business or professional that in the end does not deliver, this would not be considered a bodily injury or property damage and therefore a liability insurance would not apply. This would be taken care of by professional indemnity insurance.
Professional indemnity insurance generally protects you from:
- claims of malpractice
- professional misconduct
Without it, a business would be left paying for compensation and legal fees to defend these claims.
In Asia, professional indemnity insurance has started to become an emerging trend. This is due to growing legislation in some Asian countries and the increasing realization that consumer protection is important. Clients in Asia tend to be demanding and would often file claims against professionals on the event that the latter falls short of delivering on their high expectations of their advice or services. Additionally, professional indemnity insurance has become a requirement of sorts in which it appears on client engagement contracts and be shown as evidence. If businesses fail to acquire professional indemnity insurance, they can lose out on major deals with multinational corporations.
Some examples of professionals that need the said insurance are:
- medical and healthcare professionals
- real estate
- public relations people
Claims against architects and engineers happen often especially when clients have worked with a different set of architects and engineers in the past and find that the present work is not up to par, or when clients are not familiar with the scope of work of architects and engineers and may demand unrealistic projects and deadlines.
So being covered by a professional indemnity insurance is of the utmost important. Regardless of how experienced a firm is, mistakes happen, errors occur, and expectations are not met. In the end, it is always better to have protection in the event of litigation.
Village Insurance Direct helps expats in Hong Kong with Indemnity Insurance and other business covers required by law. Contact us today.