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From Adviser Guide: Getting Professional Indemnity Insurance

Q: What does PII protect my firm against?

Some policies provide wider coverage that extends to any civil liability, which does not always require negligence tests.

By Oliver Haill | Published Sep 27, 2012 | comments

The point of professional indemnity insurance is to protect your firm against a client’s financial loss due to any negligence by you or one of your advisers.

As a rule PII will protect firms against:

• Breach of contract

• Negligent advice

• Fraud or dishonesty of an adviser

• Loss of data or documents

• Libel and slander

• Ombudsman awards

• Defence costs

But it’s important to check the policy wordings as they relate to negligence. Some policies, explains Teresa Brewer, Sales and Services Director, Aon UK, provide wider coverage that extends to any civil liability, which that does not always require the same tests of the adviser being negligent.

“So if a claim is not accepted under your PII policy, the firm is still responsible and would have to fund any defence and indemnity.”

Negligence would be generally defined as a breach of a duty of care that results in damages. Ms Brewer says that to prove negligence, four criteria have to be met:

1.The claimant must prove they were owed a duty of care by the defendant

2.The defendant breached that duty

3.The breach of duty caused harm or loss to the claimant

4.The claimant was, in fact, harmed or damaged

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