Whether you run a construction business, distribution facility, restaurant franchise, dental...
Professional indemnity insurance (PII), also known as errors and omissions insurance, is one of the most important – and most overlooked – tools for protecting your business.
If you provide expert advice, manage high-stakes projects or deliver specialized services, even one small misstep can lead to a costly claim. Whether the issue was a genuine mistake or a misunderstanding, your client could hold you responsible for their financial loss.
That’s why professional indemnity insurance is so important. It covers legal fees, settlements and reputational damage when things go sideways. And in industries where you’re providing any type of advice or consultative work, it’s often a non-negotiable part of doing business. This can include any architectural or engineering design work or advisory services.
But here’s the thing: not all coverage is created equal.
A basic policy might satisfy contract terms. But a tailored, strategic one? That’s what actually protects your reputation, your livelihood and your long-term value.
What is Professional Indemnity Insurance?
At its core, Professional Indemnity Insurance protects you from the financial fallout of a professional mistake. That means not just the error itself – but the ripple effects it can cause, like project delays, added costs and damage to client trust.
It kicks in when a client claims your advice, service or deliverable caused them financial harm. Maybe it was a subcontractor’s mistake. Maybe a crossed wire in communication. But in the end, the blame often lands on you – and you could be paying out of pocket just to defend your name.
Types of Professional Indemnity Insurance
According to the Insurance Information Institute, Professional Indemnity Insurance generally comes in two forms:
- Claims-made policies only cover claims if the mistake and the lawsuit happen while the policy is active. Cancel or switch carriers without additional protection, and you might be left exposed.
- Occurrence policies cover incidents that happened during the policy period, even if the claim is filed years later.
Most PII policies are claims-made – so understanding your timeline and adding run-off coverage when needed is critical to staying protected.
What Does Professional Indemnity Insurance Actually Cover?
Professional Indemnity Insurance is built to protect you from the risks that come with doing expert work – especially when expectations are high and margins for error are thin.
Here's a closer look at what it typically covers and where it draws the line.
Coverage Typically Includes
- Negligence or errors in your work. A missed spec, a faulty recommendation – anything that doesn’t go as planned.
- Breach of duty or misrepresentation. Even a small oversight can be framed as a broken promise.
- Unintentional IP violations. A layout, a logo or a design are all fair game for a claim.
- Confidential data loss or mishandling. Especially if you manage sensitive client files or systems. With the average U.S. data breach costing $9.48 million, even a small oversight can carry major consequences.
- Defamation tied to your work. One misunderstood comment or report can come back to bite you.
Coverage Typically Excludes
- Intentional wrongdoing. Fraud, dishonesty, or criminal acts aren’t covered.
- Known issues. Claims tied to incidents that happened before your policy started are excluded.
- Fines and penalties. Regulatory fines or punitive damages aren’t covered.
- Bodily injury or property damage. These fall under general liability insurance, not PII.
- Employee disputes. Claims like wrongful termination or discrimination aren’t covered.
- Contract disputes. Disagreements over payment terms or performance are typically excluded.
Learn more about other key types of insurance.
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Common Gaps in Professional Indemnity Insurance and Why Tailored Coverage Matters
Professional Indemnity Insurance is an effective tool, but it only works if it’s built for the realities of your business. Too often, policies look fine on paper but fall short when it really counts. Here are the gaps we see most often:
Claims-Made Coverage Without Run-Off Protection
Most PII policies only apply if the claim is made while the policy is active – not just when the work was done. Cancel, retire, or sell your business without run-off coverage in place, and you could lose protection for past projects.
Tailored fix: If you’re nearing an ownership or winding down operations, make sure your policy includes proper run-off coverage to protect work you've already completed.
Coverage That Doesn’t Match Your Contracts
Claims often fall apart in the fine print – not because of what happened, but because your contract language and your coverage weren’t aligned. If scopes shift or roles aren’t clearly defined, you could find yourself unprotected.
Tailored fix: Coverage should reflect the actual structure and scope of your work, including subcontractor relationships, project complexity and legal jurisdiction.
Limits That Don’t Reflect Your Project Size
If you’re regularly signing high-value contracts, a $500K limit likely won’t cut it. You could be technically “covered,” but still left financially vulnerable.
Tailored fix: Limits should grow alongside your contracts. A tailored policy benchmarks your exposure against real project values and industry standards.
The bottom line is that real protection doesn’t come from checking a box. It comes from a policy that’s shaped around how your business actually operates and where your risks truly live.
Insurance Alone Isn’t Enough — That’s Where We Come In
Even the best Professional Indemnity Insurance is reactive. It helps you recover after a claim – but what keeps those claims from happening in the first place?
That’s where strategy comes in.
At Ellerbrock-Norris, we don’t just sell policies. We take a holistic approach to risk that helps you strengthen the systems that prevent issues before they become a problem in the first place.
We do this by addressing the 10 key areas of risk, which includes:
When these pieces work together, your insurance becomes a true safety net – not your first line of defense. Because real protection isn’t just about avoiding claims. It’s about building a business that’s ready for whatever comes next.
Ready to take your risk management to the next level? Let’s talk.
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