Unfortunately indemnity insurance is not insurance for insurance. That’s why we have an Ombudsman. Indemnity insurance covers professionals when they really expensive mistakes. While there exist types of indemnity insurance for almost every profession, they can all be divided into two categories: professional indemnity insurance or employer indemnity insurance.
Whether you deal with members of the public by providing them a service or offering a product, or have employees, your business will need indemnity insurance. A big booboo could cost your company thousands you haven’t budgeted for. And then try and pass that by the board.
Indemnity insurance for professionals
We are not here talking of people qualified in a profession such as a doctor or lawyer (although they have specialized indemnity insurance to cover them), but insurance which covers errors made by a company which harms a member of the public. Such professional indemnity insurance is taken out by a company for claims made by people who are not members of the company.
The type of indemnity insurance you opt for is determined by the nature of your business. For example, a company that produces goods will opt for poor workmanship indemnity insurance to cover claims made by members of the public who are dissatisfied or injured with a product. Restaurants can get similar insurance for spoilt food (which covers them for claims of food poisoning). Malpractice indemnity insurance covers doctors and lawyers for claims of poor services, while accountants and financial advisors get errors and omissions insurance for poor advice.
Indemnity insurance for employers
It isn’t enough that businesses have to endure claims made by the public, but also claims made by members of their own company. If a member of the company is injured on the job or suffers financial harm as a result of the company, then he or she may hold the company liable for the damages and sue them. These claims are covered by an employer’s liability insurance policy, and the company will be held liable if a court decides that the company’s negligence caused the damages.
Indemnity insurance for employers does not, however, cover claims made for unfair dismissal as there is legislation governing this. Unfair dismissal claims need to be disputed by the CCMA.
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