Oct 28, 2011

How professional indemnity insurance can protect those in the advertising and marketing industry

Professional indemnity insurance might be more commonly associated with the legal and medical professions, but it is appropriate and often necessary in a far wider range of industries. One of these is advertising and marketing.

There are certain industries in which professional indemnity insurance is mandatory – that is, required by law. Due to state legislation or membership of a particular profession, indemnity insurance must here be purchased by default as a condition of doing business. These are known as ‘involuntary’ professions with regards professional indemnity.

There are also those professions in which insurance is not a prior necessary, but still required in certain circumstances and therefore generally recommended. Professional indemnity (PI) insurance is typically sought by individuals whose professions offer advice as a matter of course. Examples are accounting and financial services, architecture and building, consultants, IT, legal and medical businesses. Advertising falls within this definition of offering advice, and although the consequences of a mistake might here be less severe than in the medical or legal spheres, it can still be prohibitively expensive.

Advertising and marketing
Those in the advertising and marketing industry may feel that they do not require professional indemnity insurance, since circumstances are unlikely to arise in which legal action is taken to rectify financial loss. However, this is unfortunately far from the case. As a result, it is worth carefully considering the cost and likelihood of a claim arising, and securing suitable PI if it is felt that such a claim could present an unacceptable risk. The risk and expense of such a claim will be factored into the premiums, as with all forms of insurance, as well as the level of coverage required. This means that the cost of PI in this area is likely to be low, and probably a wise investment to make.

As in other industries, good sense can prevent the chance of a claim. However, it is impossible to plan for every eventuality. In the case of advertising and marketing, including its elements of graphic design, one of the most likely problem areas is copyright. Since it is not always possible to be certain a design does not already exist elsewhere, there is the chance that your work might resemble an existing one closely enough to trigger an action. Even if this does not result in a payout, there could well be circumstances where – for this reason or others – you need to rectify such a mistake and reprint or recreate any materials required by the client. Without professional indemnity insurance, these costs would be born by your organisation. Other circumstances in which PI might be needed are loss of documents or unavoidable delays, breach of confidentiality, and breach of advertising regulations. Finally, there is the chance that your client might sue, claiming that your campaign actually had a negative effect on their business.

Types of professional indemnity insurance
Generally speaking, there are two forms of wording used for professional indemnity insurance. The first covers negligent act, error or omission. This is a basic form of cover and the insurance only applies to those narrowly-defined events. Needless to say, there are many circumstances which fall outside of this definition for which you would not be covered.

The second form of wording includes professional indemnity ‘for any civil liability’. This is an extremely broad definition, and so there is usually a list of exclusions. This ensures that the policy only covers eventualities within its necessary remit – rather than those that fall, for example, within the realm of employers’ liability or public liability.  This helps to keep premiums lower, but it means that policy wording can be quite complex. The distinction between the two types is not clear cut, and some basic policies may cover areas like libel/slander and breach of duty that other insurers place in the ‘any civil liability’ category. Because insurers in any case differ in the circumstances for which they provide cover, you should always consult with an adviser to make sure that your professional indemnity policy is suitable for your role and profession.

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