Page 9 - Life Insurance Today February 2018

3. Injury suffered by a person or property damaged as a The term "insurance," broadly speaking, refers to steps
result of that breach. taken to acquire some protection against any kind of real
or perceived actions or consequences. In the context of
In case of any event likely to give rise to a liability claim, professional liability insurance, such protection is sought
insurance company should be informed immediately. In against possible consequences arising out of one's
case any legal notice or summons is received, it should be professional conduct. As illustrated in the diagram below
sent to the insurance company. The company has the (representing a hedge fund management company),
option of arranging the defence of the case. The event professionals constantly face liability threats during the
giving rise to the claim should have occurred during the course of their work and from multiple sources. The red
period of insurance or retroactive period and the claim lines illustrate the exposure that officers and directors of
first made in writing against the insured during the policy a firm face from claims arising out of a possible breach of
period. duty:

The maximum amount payable including defence cost will What PI policy does not cover?
be the AOA limit selected. The any one year limit will get While the policy covers a wide range of risks related to a
reduced by the amount of claim or indemnity paid for any profession, it has some limitations. Every profession, and
one accident. Any number of such claims made during the every professional within that organisation, will be profiled
policy period will be covered subject to the total indemnity differently based on the job profile's risk. Professional
not exceeding the AOY limit. The policy will not pay for Indemnity insurance is a kind of insurance that is mainly
claims arising out of contractual liability, intentional non- designed to shelter professionals from claims made against
compliance of any statutory provision, loss of goodwill, them by clients.
slander, fines, penalties, libel, false arrest, defamation,
mental injury etc. This makes perfect business sense to an Architect,
Engineer, Doctor, Lawyer, Chartered
Accountant, Medical Practitioner,
Mortgage Intermediary, Insurance
Broker or a Financial Adviser. Also a
service industry like a medical
establishment would require this cover
to protect the business interests
against legal claims for error,
omissions, professional neglect for
both the principles and their
employees. Scores of Consultants,
Advertising and PR agencies and
Designers also choose to go in for this
type of insurance. The policy does not
cover any claim made against them in
respect of:
Y Any criminal act or any act
committed in violation of any law or ordinance
Professional indemnity insurance is a type of insurance Y Services rendered while under the influence of
policy which is designed to shield professionals and business intoxicants or narcotics
owners if they are found to be guilty of some event such
Y Any third party public liability
as misjudgement or some other professional risks.
Indemnity insurance is also called as professional liability Y Any condition caused by or associated with AIDS
insurance. It provides cover for the claim of providing Y Rising out of all personal injuries such as libel, slander,
inadequate services, advice, design, etc. against the insured. false arrest, wrongful eviction, wrongful detention,
Liability insurance also covers the compensation that is defamation, etc. and resultant mental injury, anguish
payable to the client for correcting the mistake. or shock

Life Insurance Today February 2018 9

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