Professional indemnity insurance is a branch of liability insurance which covers the potential liability of a service provider caused by an error or omission in his professional conduct. Use of the phrase error & omission indicates that both action/inaction (i.e. doing something which was unwanted; as well as not doing something that was required) are covered in the policy. The compensation to be paid for injury or death of a person or damage to property due to the negligent action, along with the legal expenses, are intended to be covered in this policy.
A few examples:
- In a landmark judgement in 2013 (Dr. Balram Prasad Vs. Dr. Kunal Saha & Ors. [October 24, 2013] ), the Supreme Court awarded a total compensation of approximately 12 crores to the husband of a lady who died due to medical negligence of the attending doctors. The case involved a NRI couple from USA who had come to Calcutta for a family marriage. The lady fell ill & on hospitalization the attending doctor persisted in giving over dosage of a medicine which resulted in peeling off the skin from her body., finally resulting in her death. After the legal battle of almost 15 years at various levels, the Supreme Court raised the compensation amount awarded by NCDRC In the judgement, the Court severely criticizing the conduct of attending doctors as well as Medical Council of India which is expected to regulate professional conduct of doctors.
- It is easy to imagine how an error in medical transcription by a service provider (due to misunderstanding/mis-communication) can wreak havoc on patients.
- An Engineer consultant working with a construction firm may think that the third party liability section of the construction insurance policy takes care of his professional liabilities. Unfortunately, that is not the correct understanding. The demands/liability of a professional conduct has to be met by the individual professional himself.
Let us look at another scenario of a construction firm owned by an Engineer. Even here, the professional liability component (i.e. arising from a professional error like faulty design) has to be specifically covered by a professional indemnity policy for the Engineering firm.
To summarize the reasons why a Professional Indemnity policy is a must have for anyone whose professional error has a potential to cause bodily hurt/ financial or property loss:
- Individual customer are becoming more aware of their rights that can be enforced
- The power of social media in spreading information, almost in real time, is helping in increased awareness, even among not so educated classes.
- Specific law (Consumer Protection Act) and special legal forum (consumer dispute settlement courts at district state and national level) created for it, are helping in the enforcement process
- With the Global Village sharing information, the legal concepts hitherto used in one jurisdiction are getting adopted elsewhere too eg. The concept of Class action, used in American jurisdiction has now been adopted as a specific section in Companies Act 2013.
- The amount of compensation is rising with time and may severally effect a professional with no insurance cover, in event of a liability suit.
