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5 THE INSURANCE OF PROFESSIONALINDEMNITY RISKS

Professional Negligence and Liability

Chapter 5

THE INSURANCE OF PROFESSIONAL INDEMNITY RISKS

Authored by BEN LYNCH QC AND CHRISTOPHER KNOWLES

I. INTRODUCTION

1. PI insurance

5.1 Professional indemnity (“PI”) insurance is a type of liability insurance. It is usually written on a claims-made basis (i.e., it responds to claims in the policy year, or arising from circumstances notified to the insurer in the policy year) and provides an indemnity for certain forms of liability incurred by professionals, including many claims discussed elsewhere in this work. It is critical to claims against professionals: the indemnity under it may well be a claimant’s only real hope of making any substantial recovery, let alone being fully compensated; meanwhile, the defendant professional will look to their PI insurer to fund and conduct their defence, or, if all else fails, to fund a settlement or pay a judgment. Indeed, such is the importance of PI cover that many regulators positively require that the professionals they regulate have sufficient PI cover.1 The Appendix to this chapter contains examples of PI policies, mostly from the market. The selection is short. It is intended to illustrate types of policies, and they are referred to in this chapter to highlight significant features of PI insurance.

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