Across my 15 years in the insurance industry, ten of which involved underwriting financial lines insurance, one common misconception I often encounter is that insureds believe that if they appoint a contractor to undertake work on their behalf, their exposure for that work will be transferred in full to the contractor should there be a claim. In practice, this is not the case.

In this article, I will delve into proportionate liability within professional indemnity insurance claims, focusing in particular on the impact of sub-contractors with respect to an insured’s exposure.

Professional indemnity insurance

Professional indemnity insurance (PI) stands as a safeguard against potential claims arising from errors, omissions or negligence during the course of the insured professional business.

PI defends the insured against claims for loss or damage made by their clients or third parties resulting from allegations that their services were rendered negligently.

Unless explicitly noted, professional indemnity policies will typically provide the insured with a level of vicarious indemnity for works undertaken by sub-contractors on the insured’s behalf during the course of the insured business.

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