Professional Indemnity

Visão Geral

Some workers are paid not for what they make with their hands but for what they know. A doctor, an accountant, an architect and an insurance broker all sell judgement, and a client acts on that judgement without checking it. When the judgement is wrong, the client can lose money, sometimes a great deal of it, without a single thing being broken or anyone being hurt. Professional indemnity is the insurance that answers for that kind of loss.

In this lesson you will learn exactly what professional indemnity covers, the negligence that triggers it, and the long list of professions that must carry it, several of them by Nigerian law. You will see why expert advice exposes a professional to strangers who were never their client, why these policies respond to the year the claim is made rather than the year the mistake happened, and how to tell professional indemnity apart from public liability, the distinction examiners test most.

Objetivos

  1. Define professional indemnity insurance and explain the negligence it covers
  2. Identify the professions that require professional indemnity cover
  3. Explain why professional advice creates a financial exposure to third parties
  4. Distinguish professional indemnity from public liability insurance

Nota de Aula

A young accountant in Ikeja prepares a company's tax returns and, through a careless slip, understates what the company owes. Two years later the Federal Inland Revenue Service reassesses the company and hands it a bill for the shortfall plus a penalty running into millions of naira. Nothing was stolen, nothing caught fire, no one was injured. Yet the company has suffered a real financial loss, and it blames the accountant. Can the accountant, who may not own assets worth a fraction of that bill, meet the claim? Only if the right policy stands behind the professional judgement that failed. That policy is professional indemnity.

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  1. Professional indemnity insurance protects a professional against: A. Damage to the professional's own office and equipment B. Legal liability for financial loss caused to others by negligent work C. Injury to the professional while at work D. Theft of the professional's fees by a client Answer: B
  2. Which of the following is NOT normally covered by professional indemnity insurance? A. An accountant's negligent tax advice B. An architect's defective design C. A visitor injured by a falling signboard on the premises D. A surveyor's negligent valuation Answer: C
  3. A professional indemnity policy has a limit of indemnity of 15,000,000 naira and an excess of 400,000 naira. A valid claim for a proven loss of 5,400,000 naira is made. How much will the insurer pay? A. 5,400,000 naira B. 5,000,000 naira C. 4,600,000 naira D. 15,000,000 naira Answer: B
  4. In Nigeria, a licensed insurance broker is statutorily required to keep professional indemnity cover of at least: A. 1,000,000 naira B. 5,000,000 naira C. 10,000,000 naira D. 20,000,000 naira Answer: C
  5. Under a claims-made professional indemnity policy, the policy that responds to a loss is the one in force when the: A. Negligent act was committed B. Premium was first paid C. Claim is first made against the insured D. Policy was cancelled Answer: C

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Perguntas Anteriores

Pergunta-se como são as perguntas anteriores sobre este tópico? Aqui estão várias perguntas sobre Professional Indemnity de anos passados.

WAEC SSCE - Insurance - 2018

Pergunta 1 Relatório

(a) List six experts that would require professional indemnity insurance in their operations.

(b) Explain the cover provided by each of the following insurance 'policies:
(i) personal liability
(ii) public liability
(ii) professional indemnity 
 

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