PI (Professional Indemnity) Insurance is taken out by those providing a professional service to provide cover against claims for error or negligence. Generally, PI covers the legal fees involved in defending a claim and the cost of ‘righting the wrong’ if the professional was found to have been at fault.
PI is to protect the professional against a claim, if he makes a mistake. It is, sometimes mistakenly, considered as future warranty for the building owner available to fix anything that goes wrong with the building. This is not the case, as there is no certainty that the professional was at fault or that a claim will be upheld in court.
There are two important points about PI:
Firstly it is on a ‘claims made’ basis. The claim must be made during the policy, so a 2013 policy covers claims made in 2013, regardless of when the problem happened in the past. This is not like motor insurance- if you crash today and cancel the policy, a future claim will be valid once insurance was in place on the date of the accident. This poses a problem for professionals and consumers alike; because in order to provide redress, PI insurance would have to be kept in place until the statute of limitations applies.
Secondly, in Ireland there is ‘joint and several’ liability. This means that even if a professional is 1% liable, the entire claim can be made against him as the ‘last man standing’.