Professional Indemnity: The Importance of the Professional Services Description

Professional Indemnity (PI) insurance is designed to cover insureds for errors and omissions that may arise whilst providing clients with professional services. So, it is vital to ensure that the professional services description clearly covers the scope of services provided by the insured. This article outlines some Professional Indemnity coverage considerations relating to the professional services description.

What should be included in the Professional Services Description on a PI Policy?

Professional services are the insured’s business activities that are covered under a Professional Indemnity Insurance policy. The professional services description is informed by the underwriting information the broker and insured supply to the insurer.

The description should cover all the insured’s professional activities, thereby reducing any ambiguity or misunderstanding regarding what activities are covered under the policy. It is preferable to have the professional services description be as broad as possible such as Accountants, Real Estate Agents or Consulting Engineers rather than listing specific activities. A Professional Indemnity Insurance policy that has ‘Consulting Engineers’ listed as the professional service provides broader cover than listing each engineering discipline.  However, if the insured undertakes an activity that is not a standard activity for that profession, then it should be specifically listed in the professional services description.

By way of example, consider an engineer that provides a combination of services including civil, structural, acoustic, mechanical engineering, and some project management. An effective way to describe their professional services would be to state “Consulting Engineers and Project Management”.

Where the professional services description involves listing specific business activities, then the policy may not respond where a claim relates to a business activity that has not been listed in the professional services description.

Do you need to include previous professional services on a PI Policy?

Professional Indemnity insurance policies are generally issued on a ‘claims made and notified’ basis. When discussing the professional services description with the insured, it is important to understand any professional services that were previously provided by the insured so these can be included in the professional services description.

The reason this is important is because of the impact it can have on policy response when a claim is made. If a claim is first made against the insured during the current policy period for a professional service they provided before the policy period but that professional service the subject of the claim was not included in the professional services description, then the Professional Indemnity insurance policy may not respond to cover the insured for that claim.

Consideration should also be given to professional services that the insured does not currently provide but will provide soon. Any anticipated future services should be disclosed and incorporated into the professional services description.

Are Sub-Consultants services included on PI Policies?

Insureds may engage the services of sub-contractors or consultants to provide specialised services. In doing so, the insured may be liable for the acts and omissions of those sub-contractors and consultants performing work on behalf of the insured.

Professional Indemnity Insurance policy wordings can vary in the market with regards to sub-contractor or sub-consultant cover. It is important to review the policy wording to understand your client’s cover in relation to sub-contractors and sub-consultants in the context of the insured’s professional services.

Why the Professional Services Description is Vital

The professional services description plays a crucial role in ensuring that the Professional Indemnity (PI) Insurance policy aligns with the insured’s professional services and should be broad enough to cover the insured’s past, present and future professional services along with any services provided by their sub-contractors.

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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 making a decision to buy or continue to hold a financial product, you should review the relevant Policy Wording.