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Professional indemnity insurance is often the first cover a client contract names for consultants, designers, engineers and advisers, with a set limit and a duty to keep it for years after the job. Because it is written on a claims made basis, the policy that responds is the one in force when the claim arrives, not when the work was done. Fortis Risk Solutions checks that the services described in your policy match what you actually deliver, protects your retroactive date at each renewal and arranges run-off cover if you close or sell. Have the contract clause and a description of your services ready. Call 03 7046 3766 or send an enquiry.
What Professional Indemnity Insurance Covers
Professional indemnity insurance covers businesses and professionals against legal liability from claims of negligence, errors, omissions or breach of professional duty in the services and advice they provide.
The policy pays compensation claims, legal defence costs, investigation expenses and associated losses. That funding is what lets an adviser, designer, consultant or specialist provider keep working while a client dispute is resolved.
If you give advice, prepare reports, design solutions, manage projects or deliver professional services, professional indemnity insurance is a fundamental protection for many Australian professions. Directors of those firms often add management liability insurance. It sits within our business insurance range at Fortis Risk Solutions. Licensed estate agents are one example: see our real estate agency insurance page for how the professional indemnity requirement works alongside the rest of an agency package.
Professional Indemnity Insurance: Cover Sections and Benefits
What Professional Indemnity Insurance does not cover
Professional indemnity insurance answers claims about your advice, your design or the professional service you sold. It does not stand behind everything a client is unhappy about. Common exclusions:
- Matters you knew about before the policy started, including circumstances you did not disclose
- Deliberate dishonesty or fraud by the insured, once established
- Guarantees and warranties of a result that the law would not otherwise impose
- Trading debts, refunds of your own fees and the cost of redoing the work
- Injury and property damage, which belong on public liability
- Claims between related entities, or a director suing their own company
- Work outside the professional services described in the schedule, or outside the territory stated
FRS checks that definition of professional services against the engagements you actually take on, because the wording decides what is insured, not the brochure.
How Professional Indemnity Insurance premiums are set
Professional indemnity insurance is written on a claims made basis, so insurers price the work you do now and the work still sitting behind you. Some occupations must hold it as a licence condition, including Victorian estate agencies. Factors:
- Fee income for the past year, and how it splits across the services you offer
- The profession itself, since building design and financial advice are rated above bookkeeping
- The limit of indemnity, and whether a licence, a client or a professional body sets it
- The retroactive date, and how many years of past work sit inside the policy
- Claims and circumstances notified in earlier years
- The contracts you sign, whether your own terms of engagement or a client contract with uncapped liability
- Project size, and the largest single job you took on in the year
Written terms of engagement with a liability cap are the cheapest risk control available. FRS reviews what you sign, since underwriters price the contracts as closely as the work.
How to claim on Professional Indemnity Insurance
The policy responds to claims made and notified during the period, so timing matters more here than on any other cover. Notify a circumstance even before a formal claim arrives, or the next insurer will exclude it. The FRS process:
- Notify: Tell FRS the moment a client threatens a claim, or a complaint suggests one is coming
- Do not admit fault: Do not admit fault, offer free rework or waive fees, since any of that can read as an admission
- Preserve the file: Keep the file intact, including drafts, emails and file notes, and add nothing to it after the event
- Send demands unanswered: Send any letter of demand or court document to us straight away, unanswered
- We notify the insurer: FRS notifies the insurer inside the policy period and briefs the panel solicitor
- Manage to close: The defence and any settlement are managed with you, and the notification is recorded for renewal
Notification details sit on our make a claim page.
Professional Indemnity Insurance compared with Public Liability
| Question | Professional indemnity | Public liability |
|---|---|---|
| What it covers | Financial loss caused by your advice, design or service | Injury to other people and damage to their property |
| Who buys it | Consultants, designers, agents, accountants and licensed advisers | Trades, retailers, hospitality and anyone the public visits |
| Typical trigger | A client says your work cost them money and demands compensation | Someone is hurt or their property is damaged by your operations |
| Basis of cover | Claims made and notified during the policy period | Events happening during the policy period |
The claims made basis is the difference that catches people out. Cancel the policy and the past work loses its protection, which is why run off cover matters when a firm closes or is sold. FRS keeps the retroactive date intact at every renewal and quotes public liability alongside it where site work is involved.
Professional Indemnity Insurance - Client Case Studies
Cases from the Fortis Risk Solutions broking team. Client names have been removed.
Client case: Failure to Disclose a Known Property Issue
The client situation: A real estate agent was advised that a property had previously experienced significant water damage but failed to pass this information on to a prospective buyer. After settlement, the buyer discovered the issue and incurred significant repair costs.
The buyer alleged that the agency had failed to disclose relevant information and sought compensation for the financial loss.How the policy could respond: Professional Indemnity cover could respond to allegations of negligence, error or omission in the professional services provided by the agency, including covered defence costs and compensation where the agency was legally liable.
Non-disclosure and misrepresentation of property details are recognised Professional Indemnity exposures for real estate agents.How Fortis Risk Solutions helps: Professional indemnity is written on a claims made basis, so the policy in force when the claim arrives is the one that answers. We keep cover continuous and explain what must be notified.
Client case: Client Injury Due to Poor Property Management
The client situation: A client was seriously injured after falling on loose stairs. They alleged that the insured real estate agent had breached their duty of care in managing the property, and sought $400,000 in personal injury damages.
How the policy responded: The agent’s Professional Indemnity policy was able to respond under the civil liability and defence costs sections. An early settlement was reached with the claimant, and payment was split between the agent and the landlord. The agent’s insurer paid $50,000 towards the settlement.
How Fortis Risk Solutions helps: We notify the insurer as soon as an allegation is made, which is what makes an early settlement possible.
Client case: Failure to Properly Manage a Tenancy
The client situation: A property manager failed to carry out the required routine inspections and did not adequately document the condition of a rental property. Significant property damage caused during the tenancy therefore went unnoticed and continued to worsen.
When the landlord eventually discovered the damage, substantial repairs were required. The landlord alleged that regular inspections and proper reporting would have identified the damage earlier and reduced the repair costs, and made a claim against the real estate agency.How the policy could respond: The agency’s Professional Indemnity insurance could respond to the allegation that the property manager failed to properly perform professional property management services. Cover could include legal defence costs and compensation for covered financial loss where the agency was liable, subject to the policy terms, conditions and excess.
How Fortis Risk Solutions helps: We check that property management is declared as an activity on the professional indemnity policy, because sales-only wording would not cover this claim.
Every policy is different and the outcome of a claim depends on its terms. As your broker, Fortis Risk Solutions compares insurers and policy wording before you buy, and lodges and manages the claim for you when something happens. Talk to us about your own cover.
Professional Indemnity Insurance FAQs
It is mandatory for many professions in Australia, including financial advisers, engineers, architects and other licensed or regulated professionals. Even where the law does not require it, professional bodies, client contracts and engagement agreements often do.
Professional indemnity insurance covers financial loss caused by your advice, design or professional services, for example incorrect advice that costs a client money. By contrast, public liability insurance covers injury to third parties or damage to their property, for example a client hurt at your office. Most professional businesses hold both.
Possibly. If you have held professional indemnity insurance continuously, the policy can include retroactive cover for claims arising from work you did in earlier years.
Yes. The policy generally covers claims arising from negligent acts, errors or omissions by employees, directors or contractors acting for the insured business.
Professional indemnity policies differ in wording, exclusions, retroactive dates and claim conditions, not only in premium. As your broker, FRS helps you:
- Define and disclose your professional services clearly
- Structure limits, excesses and retroactive cover
- Compare policy wordings beyond headline pricing
- Negotiate extensions and manage insurer requirements
- Act as your advocate if a claim or investigation arises
Firms that hold client data should also review how the policy sits beside their cyber insurance.
PI policies are written on a claims made basis, so the policy in force when a claim is made is the one that responds. Look at the retroactive date: cover for past work matters if advice you gave years ago is later questioned. Check run-off cover for when you retire or close the business. Then confirm the limit meets what your professional body or clients require. We check these points against your contracts at each renewal.
Related reading
Related pages
Related industry pages: Financial Services Insurance, Architect and Design Insurance, Professional Services Insurance
Talk to a broker about Professional Indemnity Insurance
Call 03 7046 3766 on weekdays between 9:30am and 6pm, email admin@fortisrisksolutions.com.au, or send an enquiry and a broker from our Box Hill or Hawthorn office will come back to you about professional indemnity insurance. Tell us what the business does and what the lease or contract asks for, and we take it from there.