Professional Indemnity: What Are Policy Extensions?

Cover provided under a Professional Indemnity (PI) insurance policy can vary greatly in the market. When reviewing a Professional Indemnity policy, it’s important to understand the extensions the policy provides and their application. Policy extensions can be automatically included or they can be purchased as an option. Extensions are generally subject to the insuring clause unless otherwise stated and some extensions can be subject to a sub-limit and varying excesses.

There are a variety of PI insurance extensions available in the market. As a starting point, this article provides an overview of some of the common automatic extensions.

Professional Indemnity | Inquiry Costs Extension

Traditionally Professional Indemnity insurance policies only provided cover for claims made by third parties for compensation. However, many professionals are also exposed to legal costs in representing themselves at inquiries. An inquiry costs extension provides cover for the insured’s representation costs in connection with these inquiries. Depending on the policy wording, the insuring clause may or may not have to be triggered to access the extension.

Under an inquiry costs extension, if the insured requires representation at a regulatory inquiry, disciplinary proceeding or other proceeding, then the insurer will pay for the reasonable costs and expenses incurred for representation of the insured at the inquiry. The insured must obtain prior written consent from the insurer to incur these costs and expenses.

Professional Indemnity | Defamation, Libel and Slander Extension

Defamation refers to the publication of statements or material that is untrue and has the effect of lowering the reputation of a person in the eyes of others. The statement may be made orally (slander) or in written form (libel). A living person, small business (employing fewer than 10 people) and non-profit organisations may sue for defamation.

A defamation extension covers compensation, costs and expenses from claims as a direct consequence of inadvertent defamation arising from the conduct of the insured’s professional business. This extension does not cover intentional defamation.

Professional Indemnity | Infringement of Copyright or Patents Extension

This extension provides cover for claims made against professionals for the unintentional infringement or alleged unintentional infringement of intellectual property rights arising from the conduct of the insured’s professional business. It is particularly relevant for professionals in creative fields such as advertising, design, marketing, or software development. In cases where a professional unknowingly uses copyrighted material, trademarks, or patents without proper permission, this extension can provide protection.

Professional Indemnity | Public Relations Expenses Extension

Professional reputations can be easily damaged, and can also be costly to repair. A public relations extension can provide cover for the cost of hiring public relations consultants to protect the insured’s reputation following a claim or anticipated claim. To access this extension the insured must have a reasonable belief that its reputation has or will be significantly impaired by a claim or anticipated claim. With the prior written consent of the insurer, the extension can cover expenses incurred for designing and implementing a publicity campaign approved by the insurer to mitigate damage to the reputation of the insured. 

Professional Indemnity | Loss of or Damage to Documents Extension

This extension provides cover for the reasonable costs associated with replacing or restoring documents which have been lost or damaged. The documents must be the property of the insured or in the insured’s care, custody or control in the conduct of the professional business. This extension is generally not subject to the insuring clause but may be subject to a sub-limit.

Documents can include deeds, wills, agreements, data, electronic records, maps, plans, records, written or printed books, letters, certificates, and written or printed documents. Generally, bearer bonds, coupons, bank or currency notes or other negotiable instruments are excluded from the definition of documents.

Professional Indemnity | Appointed Sub-Consultants Extension

Insureds often use sub-consultants to provide specialised services. In doing so, the insured may be liable for the conduct of those sub-consultants performing work on behalf of the insured.

Professional Indemnity insurance policies generally provide cover for the insured’s civil liability directly arising out of the conduct of an appointed sub-consultant providing services in the course of the insured’s professional business. Indemnity will generally not be extended to cover the liability of the sub-consultant. However, where requested, insurers may consider extending cover to the sub-consultant’s liability.

Getting to Know Extensions

Professional Indemnity (PI) insurance policies have a variety of extensions that can be relevant to specific professional or business needs. This article only touches upon some of the available extensions. It’s essential to be aware of these extensions and whether they are automatically included or optional.  For more information please get in touch with your local underwriter.

Related Articles

Defamations Claims & The Protective Shield of PI Insurance

Dodging the Copyright Infringement Minefield

Adding Fidelity to Professional Indemnity

Important Notice

Berkley Insurance Company (limited company incorporated in Delaware, USA) ABN 53 126 559 706 t/as Berkley Insurance Australia is an APRA authorised general insurer. Information provided is general only, intended for brokers and has been prepared without taking into account any person’s particular objectives, financial situation or needs. Insurance cover is subject to terms, conditions, limits, and exclusions. Underwriting criteria applies. When deciding to buy or continue to hold a financial product, you should review the relevant Policy Wording.