Giving Indemnities – Does your PI cover you?
If you are in a professional services business, like Devant, you’ll almost certainly have paid a hefty premium for a professional indemnity insurance policy. The idea of this insurance is to cover you if you breach a contractual obligation and your customer decides to sue you for damages.

So what happens if you have a claim?
The first thing you should do when you realise that you may be subject to a claim is let your insurers know, while keeping in mind that successfully defending your claim is in your interest.

What if you’ve given a contractual indemnity?
As giving an indemnity is making a commitment on your part to the other side, which may lead to large payments of costs and damages, wording has to be clear, concise and cautious. Otherwise, many buyer-drafted clauses are effectively a blank cheque from the seller.

But won’t my PI insurance protect me? You’d expect so, but in many cases you would be wrong.
It may seem unfair, but think about it – why would an insurer sign up to underwriting any blank cheque you decide to hand over to your client voluntarily? The truth is in the small print – so make sure you look under the “exclusions” section of your policy.

So what does this mean in practice?
If your insurers walk away from the claim you will have to pay up from the company funds and if not deep enough, liquidation will follow. The existence and scope of an indemnity clause could affect your very survival as a viable entity.

So what to do… and what not to do?
When faced with a demand for indemnities you have a number of options – read the full article to find out more!