Professional Indemnity Insurance

Professional indemnity (PI) insurance, also referred to as errors and omissions (E&O) insurance, provides coverage to professionals and businesses against claims made by clients or third parties alleging negligence, mistakes, or failure to deliver professional services to the expected standard. In India, this policy has gained significant importance following landmark cases under the Consumer Protection Act 2019, which expanded the definition of deficiency in service and increased the compensation limits under consumer forums and commissions. The policy typically covers legal defence costs, settlement amounts, and court-awarded damages arising from professional negligence claims. Coverage is structured on a claims-made basis, meaning the claim must be made during the policy period regardless of when the alleged negligent act occurred, subject to a retroactive date. Indian professionals who commonly purchase PI insurance include chartered accountants, architects, engineers, doctors, lawyers, IT consultants, management consultants, and company secretaries. The IRDAI has specific guidelines for PI insurance products, and some professional bodies such as the Institute of Chartered Accountants of India and the Bar Council recommend or mandate minimum levels of PI cover for their members. Under the Companies Act 2013, company secretaries and auditors face enhanced liability provisions, making PI insurance particularly relevant. The policy excludes claims arising from deliberate fraud, criminal acts, contractual liability beyond professional duty, and known circumstances prior to policy inception. With the increasing litigiousness of the Indian business environment and growing regulatory scrutiny by bodies such as SEBI, RBI, and IRDAI, professional indemnity insurance has become an essential component of risk management for service-oriented businesses.