Why professional indemnity insurance is vital in today's litigious landscape

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The increase in litigation can largely be ascribed to:

1. Improved access to justice through initiatives, such as the Small Claims Court, Legal Aid South Africa, and the various industry Ombuds.
   
2. Consumer friendly legislation, such as the Contingency Fees Act, the Consumer Protection Act, the Financial Advisory and Intermediary Services Act, and the National Credit Act.
   
3. Society becoming more aware of their legal rights through the growth of the internet and social media.
   

Professionals, such as doctors, lawyers, accountants, and so on are particularly at risk of being sued. There are many reasons therefore:

1. They are held to a higher standard and owe a duty of care to their clients.

2. They often work with high value assets, providing clients with an added incentive to sue should something go wrong.
   
3. They perform complex work, drastically increasing the risk of something going wrong.
   
4. They are often subject to draconian-like regulations, heavily weighted in favour of their clients.
   

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Professional indemnity insurance should therefore form part of any professional's shield, particularly those who offer advice, consultancy, or other services to clients. Irrespective of a professional’s educational background, experience in the industry and natural skill, mistakes can still happen. If such a mistake leads to a client suffering harm or financial loss as a result thereof, they may institute legal action to recover the damages they have suffered. Without professional indemnity insurance, a professional would be solely responsible for paying any compensation awarded to the client, as well as any legal costs associated with the claim. This can have dire financial consequences, potentially resulting in sequestration.

Selecting the right professional indemnity cover is no easy task, given that professionals operate in different industries, with some industries containing more risk than others. After a professional has considered their risk appetite, they should consider factors, such as coverage limits, policy exclusions, and premium costs. Not all industries are eligible for professional indemnity insurance coverage, given the higher risk of damage or injury associated with some industries. Insurance companies therefore assess the risk associated with each industry before deciding whether to provide coverage or not.

In conclusion, while not all industries may be eligible for coverage, it is important for professionals to research and understand their insurance options to ensure they have appropriate coverage for their specific industry and circumstances. The importance of possessing professional indemnity insurance in light of increased litigation cannot be overstated.