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How can I Protect Myself from Professional Indemnity?

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  • Written By: Larry Ray Palmer
  • Edited By: A. Joseph
  • Last Modified Date: 26 November 2016
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    Conjecture Corporation
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"Professional indemnity" is a frightening phrase in many professional circles. Unfortunately, a professional of almost any type eventually will be faced with a lawsuit brought by a dissatisfied client. The best ways to protect your business and personal assets from indemnity lawsuits are clearly outlining your services to clients in writing, keeping proper records and purchasing professional indemnity insurance.

A case of professional indemnity occurs when a service provider acts negligently in a way that causes a loss to a client or other people. Examples of professional negligent behavior could include a surgeon who mistakenly amputates the wrong limb or an auto mechanic who forgets to tighten the lug nuts on a wheel, resulting in an accident. When these mistakes occur, the professional's negligent actions can result in serious losses for his or her clients. The professional is responsible for these losses, so he or she can be sued by the client in a court of law to recoup the damages.

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By clearly outlining your services in writing and keeping complete records, you can protect yourself from professional negligence and indemnity. Any service you agree to perform for a client should be thoroughly explained to the client and written out in the form of a contract that is signed by both parties and filed away for future reference. If other services are necessary to complete the agreed-upon tasks, these services should be discussed with your client and amended to the written contract. By ensuring that everything is written out as well as explained to your clients orally, you can minimize the chances of being accused of professional negligence or misconduct.

Unfortunately, even with the best precautions in place, accidents can occur. When a professional or an employee of a company makes a mistake, the resulting fallout can mean more than just a loss of reputation. It can also include heavy monetary losses as a result of professional indemnity lawsuits. Professional indemnity insurance is designed to protect the assets of the professional in these cases.

People who work in professions where they might be at risk for negligence and indemnity lawsuits can buy professional indemnity insurance policies. When negligence claims are made, the company handling the professional indemnity insurance policy will often settle the case out of court, thus eliminating the extra costs of litigation and possibly larger court-ordered settlements. In cases where this type of settlement is not a possibility, the insurance company will pay for at least a portion of the litigation costs and any settlement ordered by the court system.

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Soulfox
Post 2

@Terrificli -- Incorporating can only protect you so much if you are a small businessperson. If you think you can protect yourself by incorporating, you may be disappointed. If you are essentially the company, there is a chance someone suing you can pierce right through that corporate shield and go after your personal assets.

Insurance, then, is the best protection.

Terrificli
Post 1

It is also a great idea to incorporate so as to shield yourself from liability if you make a mistake while working in the scope of your employment. Incorporating and purchasing good malpractice insurance (or the equivalent for your profession) can protect you pretty well from allegations of malpractice.

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