Updated October 31st, 2023
You are always conscientious with your work and make sure that any employees or apprentices follow suit. However, even the best in the business can make a mistake. This is why you should consider professional trade indemnity insurance.
When people think about indemnity insurance, attorneys, IT consultants, or medical professionals usually come to mind. While these professions are known for giving advice, other careers (such as tradies) benefit from professional trade indemnity insurance.
What is Professional Trade Indemnity Insurance?
Professional trade indemnity insurance cover protects you from third-party claims after a financial loss. The loss can be due to errors and omissions, negligence, or a breach of professional duty.
Who Needs Professional Trade Indemnity Insurance?
An indemnity policy is advisable if you are in a profession that requires interacting with clients. Even if you do not charge for specific advice, any offhanded comment that sounds like advice can be called into question should a loss occur.
Those working in the below trades could benefit from professional indemnity insurance:
- AC technicians
- Solar panel installers
- Curtain and blind installers
- Dog groomers
- House cleaners
- Lawn mowers
Many people think that hands-on professions, like the trades, would not need this type of insurance. When you look closely at indemnity insurance, you can see how this type of cover can be important for tradies.
Professional Indemnity Insurance Example
Eric operates a concrete business. After he finishes a new concrete alfresco area, the homeowner asks him how long until it is set. Eric offers his best guess of a couple of hours. Later, he receives a call from the furious homeowner. Even though she waited two hours before letting her schnauzers outside, the concrete was not set, and the dogs ran through the concrete ruining part of the concrete slab as well as getting clumps of concrete in their fur. The dogs must have expensive grooming procedures to remove the concrete, and the alfresco area is unusable. The angry homeowner says they will sue Eric because his advice led to the mishap.
Because Eric has a professional trade indemnity insurance policy, he can avoid an embarrassing and costly legal suit, and the homeowner will get compensation. It can be argued that the homeowner should have used common sense and checked the concrete before allowing the dogs outside. Although Eric did not give specific advice stating for the homeowner to wait two hours before stepping on the concrete, there is a good chance that Eric would lose in a lawsuit. Settling right away is in his best interest.
What Does Indemnity Insurance Cover?
A typical policy will have provisions for the following:
- Breaches of established trade practices
- Defamation cases
- Damages caused by negligent actions of employees
- Public relations expenses (these are often necessary to rebuild a tarnished reputation)
- Breaches of duty including:
- Claims from breaches in fiduciary duty
- Negligence in performing professional duties
- Claims from breaches in confidentiality
- Privacy breaches
What Costs Does It Cover?
- Damage costs – If you must pay for damages after settling your claim, indemnity insurance will cover the costs
- Investigation costs – Typically, an investigation is necessary in indemnity cases
- Legal costs – You will want legal representation during an indemnity case
- Public relations costs – You may need to rebuild your image and reputation following an indemnity case.
What Does It Not Cover?
- Claims relating to asbestos
- Intentional damage
- Punitive damages when found to be exceedingly negligent
- Illegal activity
- Employee injuries at work as these are covered under the compulsory worker’s compensation insurance
How is Professional Indemnity Insurance Different from Other Business Insurance?
Because there are so many types of insurance policies available for tradies, it is easy to lose track of the services various products cover occasionally.
- Professional indemnity insurance – Gives you financial protection from claims made by a third party due to your (or your employees’) breach of personal duty, negligence, errors, or omissions.
- Public liability insurance – This insurance protects you from third-party claims if you or your employees cause damage or injury to a third party while carrying out your job.
- Workers compensation – This compulsory insurance cover reimburses you for payments you made as a part of an employee’s successful workers’ compensation claim. Workers’ compensation claims can only be made by a company’s employees who experience a work-related illness or injury. This includes medical expenses, wages, treatments, rehabilitation, and additional costs associated with the illness or injury.
- Business package insurance – This is broad coverage meant to offer a solid base for adding other business insurance. Because it encompasses a variety of covers, business package insurance fits companies of all sizes.
- Contract works insurance – A contract works policy covers activities related to construction on a job site. You are protected from various losses, including damage by vandalism, weather-related damages, property damage, or personal injury to others.
- Personal accident and illness – With this cover, you have a financial safety net if you are not able to work because of an injury or illness. You will receive regular benefits to help you get back on your feet.
While many tradies do not think about professional indemnity insurance, you and your company can be at risk. You could face a lawsuit that risks your livelihood if something goes wrong. Something as simple as a passing comment can be misconstrued and used as advice from a professional. To ensure your business has the proper protection, reach out to us. Our skilled professionals will review your coverage and tell you if there are any gaps in your insurance.
The material presented here is intended for informational purposes only. It is not legally binding advice and should not take the place of an individual consultation with an insurance expert.