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M
ost tradies are familiar with
Public and Products Liability
insurance. They are often
required to have it when they take on a
contract.
However, many tradies are less
familiar with Professional Indemnity
insurance and how critical it is to
protect their business.
This is because it is not typically
included in business insurance
packages and it has traditionally been
associated with professions such as
lawyers and accountants.
As a result many tradies are leaving
themselves exposed to costs that could
cripple their business.
WHAT’S THE DIFFERENCE?
Public and Products Liability covers
your legal liability for injuries or
damage that you, your employees or
your business cause to other people or
their property.
For instance, Public and Products
Liability insurance can cover your
legal costs if faulty electrical work
electrocutes someone or causes a fire.
It can also come into play if you are
found legally liable for damage or injury
caused by a product you make or supply
that causes something, for example, a
leaky pipe or loose fitting, which in turn
causes water damage.
Professional Indemnity, on the other
hand, covers your legal costs if you
are alleged to have breached your
‘professional duty’.
As a specialist in your trade, you
are expected to provide expert and
accurate advice and services, backed by
experience and training, to your clients.
This is your professional duty.
So this policy is designed to cover
you if you have unintentionally given
inaccurate or incomplete advice, or if you
are responsible for an honest mistake
that causes a loss to your customers.
Unlike Public and Products Liability,
an injury or damage need not have
occurred to trigger the insurance.
HOW DOES IT WORK?
Here are two examples of how
Professional Indemnity could cover your
trade business.
Imagine you are a carpenter hired to
design and build a pergola. You advise
your customer that pergolas under a
certain size do not require a building
permit in their local area.
They agree to your design, so you
build the pergola according to the
specifications you provided; however,
after it is built the council tells the
customer that the pergola is above the
permitted size and it will be have to be
taken down and rebuilt.
In this case, Professional Indemnity
insurance would typically cover the
costs associated with deconstructing
and rebuilding the pergola for the
customer, which resulted from your
failure to give accurate and complete
advice. It can also cover any legal costs
if your customer takes you to court.
That said, it does not normally cover any
fines for building without permits.
Now, imagine you are a tiler who
has subcontracted a builder to tile a
customer’s bathroom. You come to
inspect the bathroom and find that the
wrong tiles have been installed.
This is a breach of your contractual
liability, because you are responsible
to ensure the work is carried out
correctly as set out in the contract
arrangements.
Professional Indemnity could then
cover you for the cost of replacing the
tiles with the correct ones.
Honest mistakes can happen. But
making up for these mistakes can be
extremely costly.
Professional Indemnity insurance
can help you fix these mistakes while
minimising the financial stress it places
on your business.
Fortunately, many insurers are now
making the policy more easily available
in their business packages, such as
GIO’s Mobile Business Protect pack.
This will make it more accessible
for tradies looking to protect their
businesses from crippling costs.
RISKY ADVICE
Professional Indemnity
insurance is essential to
protect tradies’ businesses
and livelihoods. GIO Insurance
commercial portfolio senior
leader
Leigh Smith
explains.