Professional indemnity insurance necessary?

[richy]

hi. atm my ltd has skipped on the professional indemnity, someone i met through a client told me that the buck doesn't stop at the ltd.. and i could be held personally liable as the director... could anyone tell me if this really is the case?

..if so, perhaps we should get a professional indemnity policy after all..
any tips/advice appreciated.
cheers, richy

[Diver]

hi. atm my ltd has skipped on the professional indemnity, someone i met through a client told me that the buck doesn't stop at the ltd.. and i could be held personally liable as the director... could anyone tell me if this really is the case?

..if so, perhaps we should get a professional indemnity policy after all..
any tips/advice appreciated.
cheers, richy

Yes it is true

[tim123]

Yes it is true

Not quite.

You can be personally held liable as a professional <whatever>.

You don't attract a liability wearing your 'directors' hat because you make a business decision to do, or not to do something [1], but you can attract a liability because as a professional you make a technical decision to do, or not to do, something.

I hope that it is obvious that the set of 'wrong' things in each category are not the same. Note that something fitting in the business decision category doesn't relieve you from having to make the correct technical decision as well.

The companies Limited Liability covers you ONLY for the former. But as its name implies, Professional Liability covers you for the latter. And for the pedants, there are other ways of avoiding liability for technical 'mistakes'.

[1] The exception is, if that decision is to trade whilst insolvent, but then no insurance will cover you.

Tim

[NotAllThere]

Yes it's necessary. Many clients and agents insist on it.

No it's not necessary. I believe the question was once asked of an insurer whether anyone (contractors presumably?) had ever claimed against their PI insurance. The answer was "no".

For the amounts we "need" to cover, the premiums are not too bad. Just consider it another "tax" on running a company. If client or agent asks for a ridiculous level of PI, start negotiating - e.g. "I'll cover up to £1,000,000 - if you want more than that, I'll have to add it to my fee".