What is Indemnity Insurance

Professional Indemnity Insurance is designed to indemnify a consulting practice against its financial loss when establishment of a legal liability requires the consulting practice to compensate either a client or other third party for damages. The indemnity provided is usually restricted to legal liability that arises from acts, errors or omissions or breach of professional duty in the provision of professional advice or services.

A duty of care at common law is owed to clients and any other parties to who may rely upon advice or other professional service provided by the practice.  This duty of care may even include parties who were previously unknown to the professional.

Professional Indemnity Insurance is essentially a private contract between the consulting practice and its insurer and does not inure to the benefit of a client or any other parties.  The indemnity provided by the insurance is against losses incurred by the consulting practice from proven legal liabilities, rather than any moral obligation or any other commercial considerations.

The Indemnity

Professional Indemnity Insurance is contract of indemnity.

“When claiming for loss the Insured is entitled, within the limits of the policy and its conditions, to be placed in the same financial position as the Insured occupied immediately prior to the loss.”

In other words, the object of the principle of indemnity is to reimburse the Insured for financial loss, but does not include any element of profit from the insurance.

In addition to the actual loss, the Insured may be entitled to indemnity for the costs awarded to the claimant and the legal and investigative costs necessarily incurred in conducting a defence against the claim.

The Cover

The policy should preferably be a modern “civil liabilities” contract of insurance. This means, in general terms, the indemnity available under the policy will be triggered by demands for compensation from clients or third parties against the Insured relative to “civil liabilities” rather than just demands for compensation based upon allegations of “negligence”. 


LPMS offers Professional Indemnity Insurance (and other insurance products) to the Valuers, Surveyors and Quantity Surveyors who are members. If you are interested in becoming an LPMS member to take advantage of this read more about the benefits of membership, contact us today or apply online to become a member.