With rising awareness and courts getting consumer friendly, more aggrieved clients are taking professionals to court.
How indemnity insurance minimises the financial impact of such adverse rulings? Read on……….
SAMPLE this: An Illinois jury recently awarded the parents of a seven-year-old boy $12 million in a medical malpractice case against the doctor who delivered the ‘disabled’ child. In another case last year, an elderly man’s death brought a $5.25-mn malpractice verdict against a Texas doctor, while a Washington, DC, judge filed a $67-mn lawsuit against his drycleaner just for losing his favourite pair of pants!
If you, however, thought such things can happen in western world only, think again. For, India’s premier medical institution AIIMS was also some time back ordered to pay Rs 5 lakh in damages to a woman for surgically removing one of her body parts after wrongly diagnosing that it was affected by cancer. And that’s not the ‘lone’ case of medical negligence or error where the victim or the victim’s family had been awarded compensation.
In fact, with rising consumer awareness and courts becoming more consumer-friendly, several other patients have sued doctors and hospitals, and it is only a matter of time before disgruntled clients take other professionals and professional bodies — such as CAs, lawyers, architects, consultants, law firms, IT companies, BPOs and financial institutions — to court. Currently, no matter what professional business you’re in, client expectations of service and quality of advice continue to grow. The downside, however, is the increasing number of claims for alleged negligence or breach of duty, the cost of which, in some cases, can be exorbitant.
One saving grace, however, is that the extent of damage can be reduced if someone has already opted for professional indemnity insurance, and any loss or damage caused to the victim is not the result of any deliberate act or willful neglect. Broadly speaking, professional indemnity insurance — commonly known as PI insurance — is a financial instrument that indemnifies professionals against any legal liability such as injury, loss or damage, caused due to their professional negligence, or, in other words, an error or omission committed while performing a service. This also covers the legal expenses that a professional has to incur to defend such court cases.
One salient feature of indemnity insurance is that the scope of cover varies with each profession. Registered medical practitioners such as surgeons, physicians and cardiologists, for instance, are protected against legal liability claims made by any of their patients that may be based on bodily injuries and/ or death, while engineers and architects are protected against liability arising out of design defect, inappropriate design leading to construction damage, and loss of life to the third party. The policy also deals with professional liability exposures of accountants and lawyers who hold themselves out to the public as professionals who are willing to perform professional services, for a fee, as independent contractors or their employees, partners or shareholders. The three conventional theories of recovery against accountants and lawyers are breach of contract, tort and statutory violations.
Indemnity insurance, however, doesn’t cover liabilities arising out of criminal acts or any act committed in violation of any law or ordinance, besides services rendered while under the influence of intoxicants. Likewise, fines, penalties, punitive or exemplary damages are not covered, nor any third party public liability or losses arising out of war and nuclear perils. Similarly, breach of confidentiality or prior knowledge or anticipation of a claim will only lead to the rebuttal of a claim. In fact, each insurer has its own list of exclusions which must be carefully taken into consideration before taking any cover.
Currently, apart from state-run insurers such as United India Assurance, New India Assurance, National Insurance and Oriental Insurance, private players such as Bajaj Allianz General Insurance, Tata AIG, ICICI Lombard, Reliance and Iffco Tokio are offering this cover to professionals. Some insurers even have separate policies for doctors, CAs, engineers, lawyers, architects and stock brokers.
There is no fixed limit of indemnity though and this depends on the insured’s perception of risk and the area of operations. Generally, however, individuals buy liability limits in the range of Rs 2 lakh to Rs 5 crore, while this can go up to Rs 500 crore in the case of professional bodies and companies. For determining the indemnity limit, thus, the insured has to assess his risk, the probability of the occurrence, and the maximum loss he can bear without jeopardising his business. US, European and Australian companies usually mandate that their Indian service providers have at least $1 million limit of indemnity, but some large BPOs or IT companies may have $10m or higher limits; a financial services company may have a minimum of $100m limit of indemnity.
So far as the premium rates are concerned, they are based on the risk profile of the insured and can cost up to 2.5% of the limit of indemnity. Broadly speaking, the premiums can range between 0.2% and 2.5% of the limit of indemnity, depending upon the type of coverage and the quality of risk.
Whatever be the case, the sum insured should be chosen in a manner that it covers any legal obligation that the insured may face at any given point of time based on The adequacy of sum insured and the coverage with extensions opted are the most important factors to be borne in mind while taking the cover.
FINEPRINT
WHO’S COVERED
Professionals such as doctors, CAs, engineers, architects, consultants, lawyers, advocates and professional bodies
SCOPE OF COVERAGE
Protection against claims brought in respect of negligent acts, errors or omissions in the performance of professional services. Defence expenses and damages arising because of judgements and arbitration awards are also covered
COMMON EXCLUSIONS
Prior knowledge or anticipation of a claim; intentional loss; breach of confidentiality; services rendered while under the influence of intoxicants; fines, penalties, exemplary, punitive damages; dishonesty of employees; etc
LIMIT OF INDEMNITY - No fixed limit
PREMIUM RATES - Between 0.2% and 2.5% of the limit of indemnity
How indemnity insurance minimises the financial impact of such adverse rulings? Read on……….
SAMPLE this: An Illinois jury recently awarded the parents of a seven-year-old boy $12 million in a medical malpractice case against the doctor who delivered the ‘disabled’ child. In another case last year, an elderly man’s death brought a $5.25-mn malpractice verdict against a Texas doctor, while a Washington, DC, judge filed a $67-mn lawsuit against his drycleaner just for losing his favourite pair of pants!
If you, however, thought such things can happen in western world only, think again. For, India’s premier medical institution AIIMS was also some time back ordered to pay Rs 5 lakh in damages to a woman for surgically removing one of her body parts after wrongly diagnosing that it was affected by cancer. And that’s not the ‘lone’ case of medical negligence or error where the victim or the victim’s family had been awarded compensation.
In fact, with rising consumer awareness and courts becoming more consumer-friendly, several other patients have sued doctors and hospitals, and it is only a matter of time before disgruntled clients take other professionals and professional bodies — such as CAs, lawyers, architects, consultants, law firms, IT companies, BPOs and financial institutions — to court. Currently, no matter what professional business you’re in, client expectations of service and quality of advice continue to grow. The downside, however, is the increasing number of claims for alleged negligence or breach of duty, the cost of which, in some cases, can be exorbitant.
One saving grace, however, is that the extent of damage can be reduced if someone has already opted for professional indemnity insurance, and any loss or damage caused to the victim is not the result of any deliberate act or willful neglect. Broadly speaking, professional indemnity insurance — commonly known as PI insurance — is a financial instrument that indemnifies professionals against any legal liability such as injury, loss or damage, caused due to their professional negligence, or, in other words, an error or omission committed while performing a service. This also covers the legal expenses that a professional has to incur to defend such court cases.
One salient feature of indemnity insurance is that the scope of cover varies with each profession. Registered medical practitioners such as surgeons, physicians and cardiologists, for instance, are protected against legal liability claims made by any of their patients that may be based on bodily injuries and/ or death, while engineers and architects are protected against liability arising out of design defect, inappropriate design leading to construction damage, and loss of life to the third party. The policy also deals with professional liability exposures of accountants and lawyers who hold themselves out to the public as professionals who are willing to perform professional services, for a fee, as independent contractors or their employees, partners or shareholders. The three conventional theories of recovery against accountants and lawyers are breach of contract, tort and statutory violations.
Indemnity insurance, however, doesn’t cover liabilities arising out of criminal acts or any act committed in violation of any law or ordinance, besides services rendered while under the influence of intoxicants. Likewise, fines, penalties, punitive or exemplary damages are not covered, nor any third party public liability or losses arising out of war and nuclear perils. Similarly, breach of confidentiality or prior knowledge or anticipation of a claim will only lead to the rebuttal of a claim. In fact, each insurer has its own list of exclusions which must be carefully taken into consideration before taking any cover.
Currently, apart from state-run insurers such as United India Assurance, New India Assurance, National Insurance and Oriental Insurance, private players such as Bajaj Allianz General Insurance, Tata AIG, ICICI Lombard, Reliance and Iffco Tokio are offering this cover to professionals. Some insurers even have separate policies for doctors, CAs, engineers, lawyers, architects and stock brokers.
There is no fixed limit of indemnity though and this depends on the insured’s perception of risk and the area of operations. Generally, however, individuals buy liability limits in the range of Rs 2 lakh to Rs 5 crore, while this can go up to Rs 500 crore in the case of professional bodies and companies. For determining the indemnity limit, thus, the insured has to assess his risk, the probability of the occurrence, and the maximum loss he can bear without jeopardising his business. US, European and Australian companies usually mandate that their Indian service providers have at least $1 million limit of indemnity, but some large BPOs or IT companies may have $10m or higher limits; a financial services company may have a minimum of $100m limit of indemnity.
So far as the premium rates are concerned, they are based on the risk profile of the insured and can cost up to 2.5% of the limit of indemnity. Broadly speaking, the premiums can range between 0.2% and 2.5% of the limit of indemnity, depending upon the type of coverage and the quality of risk.
Whatever be the case, the sum insured should be chosen in a manner that it covers any legal obligation that the insured may face at any given point of time based on The adequacy of sum insured and the coverage with extensions opted are the most important factors to be borne in mind while taking the cover.
FINEPRINT
WHO’S COVERED
Professionals such as doctors, CAs, engineers, architects, consultants, lawyers, advocates and professional bodies
SCOPE OF COVERAGE
Protection against claims brought in respect of negligent acts, errors or omissions in the performance of professional services. Defence expenses and damages arising because of judgements and arbitration awards are also covered
COMMON EXCLUSIONS
Prior knowledge or anticipation of a claim; intentional loss; breach of confidentiality; services rendered while under the influence of intoxicants; fines, penalties, exemplary, punitive damages; dishonesty of employees; etc
LIMIT OF INDEMNITY - No fixed limit
PREMIUM RATES - Between 0.2% and 2.5% of the limit of indemnity
