What the policy covers
Professional liability insurance (internationally known as Professional Indemnity or Errors & Omissions) protects against claims from clients and third parties for financial losses caused by unintentional errors, omissions or negligence in providing professional services.
Examples:
- an error in design documentation led to a structure having to be rebuilt;
- a consultant gave wrong advice and the client suffered losses;
- a failure in software you developed brought a customer's business to a halt;
- a valuer got the value wrong and a deal turned out unprofitable;
- client documents handed over for work were lost or damaged.
The policy usually covers the compensation under a claim or court ruling, legal defence costs, and expert and mitigation costs agreed with the insurer.
Where insurance is required by law
For a number of professions, liability insurance is required by federal law. They include:
- insolvency practitioners (arbitration managers) — Federal Law "On Insolvency (Bankruptcy)" (127-FZ);
- valuers — Federal Law "On Valuation Activities in the Russian Federation" (135-FZ);
- notaries in private practice — the Fundamentals of Russian Legislation on Notaries;
- cadastral engineers — Federal Law "On Cadastral Activities" (221-FZ);
- customs representatives (brokers) — customs regulation legislation.
Minimum limits and the insurance procedure for each profession are set by the relevant law and SRO requirements. Check them against the current wording before taking out a policy — the requirements change from time to time.
For other professions the policy is voluntary but often necessary in practice:
- Designers and survey engineers — many SROs (self-regulatory organisations) operating under the Russian Town Planning Code require members to insure their liability.
- Bidders under 44-FZ and 223-FZ (Russia's procurement laws) — the customer may write an obligation to insure the contractor's liability into the contract.
- Work with large and foreign clients — a policy is part of the contractor requirements.
Contract parameters
- Limit of liability — aggregate and per claim; defence costs may be within the limit or in addition to it.
- Deductible — the amount the policyholder bears itself on each claim.
- Insured persons — the company, its employees, engaged specialists, former employees for their period of work.
- Territory — Russia or an extension to clients and projects abroad.
Who needs it
Lawyers and consultants, auditors and accountants, architects and engineers, IT integrators and developers, advertising and marketing agencies, insurance agents, real-estate agents, medical organisations and private-practice doctors, experts and translators.
Claims made and the retroactive period
Most professional liability policies operate on a claims-made basis: the insured event is a claim made during the policy period for an error committed after the retroactive date. This means:
- when switching insurers, keep the retroactive date, otherwise past errors will be uncovered;
- when ceasing business, ask about an extended reporting period for claims;
- tell the insurer about known circumstances that may lead to a claim — otherwise they may be excluded.
What drives the price
- Profession and the scale of possible errors: designing complex structures costs more than accounting services.
- Revenue, number of specialists, size of typical contracts.
- Limit of liability, deductible, length of the retroactive period.
- Qualifications, experience, a quality control system.
- History of claims and lawsuits.
You can estimate the cost with the calculator; the final quote is based on the insurer's questionnaire.
How to choose an insurer
- Check the Bank of Russia licence and experience with your profession.
- Make sure the description of activities in the contract matches what you actually do.
- If the policy is needed for an SRO or by law, check it against the requirements before paying.
- Review profiles in the insurer directory.
Handling claims
- Notify the insurer as soon as you receive a claim or lawsuit.
- Do not admit fault or promise compensation without agreement.
- Provide the client contract, correspondence, work deliverables and the loss calculation.
- Agree the case strategy and the choice of lawyer with the insurer.
Common mistakes
- A narrow description of activities — new services are left uncovered.
- Losing the retroactive date when switching insurers.
- Expecting the policy to cover fines, penalties and warranty obligations — these are usually excluded.
- A limit lower than the contract or SRO requires.
Related types: general liability, directors and officers liability (D&O), cyber risks. A request to Polis Re specialists will help you find a policy.
