A professional indemnity insurance claim usually arises when a client raises an allegation against a professional. If a client suffers a financial loss due to a professional’s negligence, error, or omission, they can take legal action, which may trigger the claim process.

There are several situations where professional indemnity claims can arise. For example, if you are a lawyer and a client incurs a financial loss due to advice you provided, the client may file a case against you for professional negligence. Under such a situation, your professional indemnity insurance plan will cover the legal expenses.

There are various scenarios or small mistakes that can trigger professional indemnity insurance claims. Let us discuss these scenarios in detail.

Errors in Documentation

One of the reasons why professional negligence insurance claims are triggered is errors or mistakes in client documentation. If the professional made errors in client documentation, such as clerical errors, misfiled documents or missing information, this results in client loss. Then the client can sue the professional for such clerical errors that trigger PI claims.

Communication Failures

Poor communication is a common reason for professional indemnity claims. When a professional fails to clearly explain the scope of services, terms of the agreement, or key updates, it can lead to misunderstandings. If such communication gaps result in a financial loss for a client, the client has the right to take legal action, which may lead to a PI claim.

Missed Deadlines & Compliance

Missing deadlines or failing to comply with legal, regulatory, or contractual obligations can seriously impact a client’s interests. Such lapses may lead to penalties, loss of rights, or legal disputes. When these consequences cause financial loss, clients can hold the professional responsible and initiate a professional indemnity insurance claim.

Negligence & Inadequate Advice

Negligence or inadequate professional advice occurs when guidance is careless, incomplete, or incorrect. Clients often rely on this advice to make important decisions. If the advice results in financial damage or legal trouble for the client, they may seek compensation and trigger a professional indemnity insurance claim.

Delays in Service

Another mistake leading to professional indemnity claims is a delay in providing services. Clients heavily rely on professional services. If, for any reason, the insured professional is unable to deliver the service, the client suffers a significant loss. In such a situation, a client can seek compensation, which might trigger PI claims.

Breach of Contract

When two or more parties enter into a professional relationship, they are bound by a contract or service agreement. If the insured professional fails to meet the agreed terms, deliverables, or obligations, it may constitute a breach of contract. If this breach causes financial loss to the client, they may initiate legal action and raise a professional indemnity insurance claim.

Let us take professional liability claim examples to understand the process. Aniket is a company secretary who manages multiple clients. Due to a clerical error while handling statutory filings, one of his clients suffers a financial loss and decides to sue him for professional negligence.

Fortunately, he has bought a PI insurance plan for CS to safeguard himself against various professional risks. Once Aniket receives the legal notice, he immediately informs the insurer and submits the required claim documents.

The insurer reviews the claim, appoints legal experts to handle the defence, and covers legal expenses and compensation, in accordance with the policy terms and coverage limits.

Filing a professional indemnity insurance claim is straightforward. Here is how you can file a claim.

Step 1: Notify Insurance Provider

The very first thing insured professionals need to do is inform the insurance provider about the potential claims. This can be done as soon as they become aware of the client's lawsuit or if they receive legal notice.

Step 2: Fill Out Claim Form

After that, insured professionals must complete the PI claim form accurately, including the policy number, client details, and other required information.

Step 3: Provide Documentation

Once the claim form is filled out accurately, you need to submit it to the insurance provider along with other documents.

Step 4: Investigation and Review

The insurance provider will review the claim by appointing a surveyor or investigator to verify its authenticity.

Step 5: Claim Settlement

If the claim is valid, the insurance provider will handle the compensation amount, legal fees, etc., as per the policy terms and conditions.

Here is the list of documents you need to submit to file the professional indemnity insurance claim.

• Duly signed and filled out the PI claim form

• Original PI insurance document

• Proof of address and identity

• Professional certificates

• Client details

• Incident reports

• Evidence of errors and negligence

• Financial proof

• Legal documents

• Any additional documentation required by the insurer

When you receive a potential lawsuit complaint from the client, here are the steps you need to take to avoid unnecessary complications and delays.

• Do not admit liability in any case without your insurance provider's presence. Admitting fault or settling without the insurance provider's presence can result in further complications.

• If you have received a legal notice or complaint from the client, do not respond without informing the insurance provider.

• Lastly, maintain the records of all communication with the insurance providers and involved parties.

There are several reasons the submitted professional indemnity insurance claim may be rejected. Some of these reasons are listed below:

• Suppose the insured professional did not or missed to inform about the claim to the insurance provider on time. Then this could be a valid reason to reject the claim request.

• If, at the time of purchasing a plan, the insured professional provides inaccurate or false information to the insurance provider, this could result in a claim rejection.

• Another reason a claim may be rejected is if it is for something excluded under the policy.

• If the documentation is not up to mark or incorrect when filing a claim, then this could also result in claim rejection.

Filing a professional indemnity insurance claim can feel stressful, especially when legal notices and client disputes are involved. Here are some tips to ensure a smooth professional indemnity insurance claim.

• The first tip is to read the document carefully to understand the policy's inclusion and exclusion in detail. This will help avoid surprises during claims, which could result in rejections.

• Another tip to avoid claim rejection is to accurately disclose all information to the insurance provider when buying a plan. Do not hide anything.

• Report the incident to the insurance provider promptly within the stipulated time frame, if any.

• Keep a detailed record of the documents and evidence related to the claims.

Knowing about the professional indemnity insurance claim process is essential for professionals such as lawyers, doctors, interior designers, consultants, and other service providers. By understanding the process, professionals can file a claim on time and protect themselves against financial losses arising from negligence, errors, or omissions.

If you are looking for the right professional indemnity insurance plan, TATA AIG offers customised plans tailored to your profession. For instance, if you are a doctor, our professional indemnity insurance is designed to protect you against claims arising from medical negligence, errors, or omissions, and to cover legal and compensation costs.

Our professional indemnity insurance plan also includes features such as wide coverage, digital processes, quick policy issuance, claim assistance, and more. Secure yourself with our tailored PI insurance plan.