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CO-WRITTEN / PARTNER | Staff Reporter, Hong Kong

Avoid crippling litigation costs with proper insurance

It takes twenty years to build a reputation, and just five minutes to ruin it. Professionals should keep this old adage in mind when offering their services to clients, as they expose themselves to the possibility of litigation should anything go wrong. A lawsuit can make or break a business, with rising litigation costs that cannot be easily shouldered by most professionals.

“In today’s world, in which litigation is increasing, people are eager to take advantage. A lawsuit can be brought against any professional for alleged or actual mistakes and even if no error was made, simply defending these suits can be very costly,” warns Neil McCormick, Senior Manager, Insurance & Estate Planning, Platinum Financial Services. “Any claims against you, be they legitimate or unfounded, will typically require significant funds to investigate, defend and settle. The damage to reputation can also take a financial toll on your balance sheet.”
All-around protection
This is where a Professional Indemnity (PI) or Professional Liability Insurance policy comes in handy. Professional Liability Insurance will indemnify insured parties for losses that they become legally liable to pay as a result of claims alleging a breach of their professional duty in the provision of their professional services. It also covers associated legal costs in defending these claims. Professional indemnity insurance provides protection for businesses, sole traders or freelancers that offer advice or services to third parties including both the general public and other businesses. “As a result of the professional service that you offer you owe a duty of care to those who might rely upon what you tell them. This means that a vital part of your insurance will be Professional Indemnity cover,” says McCormick.

The PI policy can offer coverage for compensation which a professional might need to pay to correct a mistake. It covers any legal costs due to negligence, such as giving incorrect advice or making a mistake in one’s work.

Traditionally, the coverage was closely connected with high-risk professions such as lawyers, doctors, engineers, accountants and financial advisors. At present, however, the term “professional” is applied broadly and as such many different professions should have Professional Indemnity in place.

There are a variety of ways in which professional services providers can make mistakes from which a lawsuit can arise. For instance, professionals can overlook a critical piece of information, misstate a fact, or be misunderstood. They may also be sued by their clients over allegations such as: error, omission, or negligence in providing a service; failure to provide a service, fraud, improper documentation, malpractice, nondisclosure, violation of state and federal law. “We now live in a world with ever-increasing demands being placed upon the services that we offer and mistakes are not easily forgiven. Place this against a backdrop of a stricter regulatory and contractual framework that we must all work within and the risks are clear. No professional is safe without the right PI insurance to protect them from civil liability as well as financial and reputational loss,” McCormick notes.

Backed by the best
Professionals should absolutely not take the chance that litigation costs might cripple their company. Consider, for instance, the experience of an Interior Designer who accepted a contract for the design and fit-out of a boutique hotel. When the configuration of the lift and lobby area did not meet the original project specifications as there was not sufficient room within the concierge and reception area, the client was saddled with additional costs, materials and overall delays to the project. The interior designer was held liable for this breach. With professional indemnity coverage, the interior designer can rest easy knowing that the insurance policy will address litigation costs.

When providing a quotation, insurers consider a number of factors in determining the type of coverage and terms and conditions that will be imposed. Considerations include (but not limited to): scope of professional services provided; annual fee income or projected revenue; split of activities across different jurisdictions; claims history; the scope of coverage including the limit of liability and deductible required.

“Policies may vary according to the insurer but a professional indemnity insurance policy would typically not cover the following: Insolvency, Terrorism, Intentional damage or wrongdoing, pollution, general liabilities including property damage or bodily injury, pending or prior circumstances and/or claims,” McCormick adds.
Platinum Financial Services offers a number of policies from top institutions, to cover virtually all requirements. Lifestyle Insurance is the dedicated independent General Insurance arm of Platinum Financial Services. Lifestyle Insurance aims to provide a first class, impartial, comprehensive General Insurance service that provides value for money and reliable, straightforward service to save clients both time and money.

Platinum Financial Services is the ideal financial services provider of the 21st century - combining core traditional values of excellent service and sound independent financial advice with innovative client-oriented products and services. It guarantees some of the most competitive premiums available anywhere, and offers a diverse range of tailored financial and investment products, such as capital investment, retirement planning, life insurance, general insurance, offshore banking, international income protection and mortgage repayment, amongst others.

Platinum Financial Services is a member of the Business Class Group. The Business Class Group consists of a number of specialist operating brands providing a comprehensive range of quality services to the professional expatriate and high-net worth local community across Eastern Europe and Asia. Headquartered in Hong Kong with offices in China and Thailand the Business Class Group assists both private individuals and corporate businesses.

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