‘Professional Indemnity insurance’ and ‘Legal Expenses insurance’ are both types of coverage designed to protect professionals and businesses, but they serve different purposes:

 

Professional Indemnity Insurance

Purpose:

• Protects professionals against claims made by clients for losses or damages resulting from negligent services or advice provided.

Coverage:

• Covers legal costs and expenses in defending claims.
• Pays for compensation awarded to clients for professional errors, omissions, or negligence.
• Commonly used by professionals such as accountants, consultants, and medical practitioners.

Key Features:

• Claims-Made Basis: The policy operates on a claims-made basis, meaning it covers claims made during the policy period, regardless of when the incident occurred, provided it was after the retroactive date.
• Errors and Omissions: Covers mistakes, errors, and omissions in the provision of professional services.
• Breach of Duty: Protects against breaches of professional duty or failure to perform to the required standard.

Examples:

• An accountant makes an error in a client's tax return, resulting in a financial loss for the client.

 

 

Legal Expenses Insurance

Purpose:

• Covers the cost of legal representation and advice for various legal issues that a business or individual might face.

Coverage:

• Legal costs for defending or pursuing a wide range of legal actions, including employment disputes, contract disputes, property issues, tax investigations, and more.
• Legal advice via a free helpline and representation in court or tribunal.

Key Features:

• Legal Defence: Covers costs of defending against various legal claims, not limited to professional negligence.
• Legal Advice: Includes access to free legal advice helplines.
• Wider Scope: Can cover a broader range of legal issues beyond professional services, such as employment disputes.

Examples:

• A business faces a dispute with a supplier over a breach of contract.
• An employer needs to defend against an unfair dismissal claim by an employee.

 

 

Comparison Summary

• Focus:
  • Professional Indemnity Insurance: Focuses on protecting against claims of professional negligence or errors.
  • Legal Expenses Insurance: Focuses on covering legal costs for a variety of legal issues, including but not limited to professional negligence.
• Scope of Coverage:
  • Professional Indemnity Insurance: Specific to professional services and advice.
  • Legal Expenses Insurance: Broad coverage, including employment disputes, contract disputes, property issues, etc.
• Claims Basis:
  • Professional Indemnity Insurance: The policy is on a claims-made basis.
  • Legal Expenses Insurance: Covers incidents that occur during the policy period.
• Legal Costs:
  • Professional Indemnity Insurance: Covers legal costs related to defending professional negligence claims.
  • Legal Expenses Insurance: Covers legal costs for a wide range of legal issues.

 

In summary, while both types of insurance offer protection against legal costs, Professional Indemnity insurance is specifically tailored to protect against claims arising from professional services and advice, whereas Legal Expenses insurance provides broader coverage for various legal disputes a business or individual might face.

Trafalgar Risk Management has created a system where clients are able to build their own policy by selecting what types of cover are required for their activities, what levels of cover they would require for each type and add or remove any types of cover (except for the Professional Indemnity cover) throughout the policy period.

 Professional Indemnity is a compulsory to purchase a policy, however a multitude of additional professional insurance products are available to add-on, including Legal Expenses.

 

Please visit our website www.trafalgarinsurance.co.uk for a quote, or contact us with any queries on trmadmin@trafalgar.uk.com or call 0333 8 000 000.