Benefits of Professional Indemnity Insurance in a Liability Case

In contrast to conventional general liability insurance, exali.com’s Professional Indemnity Insurance for Digital Drofessions also covers financial losses. Financial losses are defined as all damages in which a third party – for example your customer – suffers financial damages or loss of assets.

Pure financial losses: In this context, we talk about pure financial losses. These are damages which have not previously caused any personal injuries or property damage. If, for example, a webshop’s checkout process doesn’t work because of a programming error, the lost sales lead to pure financial losses for the webshop operator.

Consequential financial losses: If, on the other hand, a financial loss is the result of property damage or personal injury, this is referred to as a consequential financial loss. An example of this would be an IT service provider employee physically damaging the web server during maintenance work (property damage). Subsequently, data has to be recovered at great expense. These costs are thus consequential costs arising from the property damage and are referred to as consequential financial losses.

Pure financial losses make up the overwhelming majority of losses at around 90 percent (source: internal study of exali claims). The causes of losses vary considerably: Reasons range from poor performance to professional oversights and from non-fulfilment of contracts to violation of rights (for example copyright, trademark or licence infringements). All of these damages are of course fully insured with professional indemnity insurance from exali.com.

Third-party Damage Examples

Deviation from Agreed Quality

As a cloud computing provider or provider of SaaS services, you conclude certain service level agreements (SLAs) with your customers regarding availability. Due to a “force majeure” event, you are unable to comply with contractually guaranteed availability levels through no fault of your own.

Insurance protection: Professional indemnity insurance provides insurance protection in the event that you are responsible for deviating from the agreed level of quality even if you are not directly at fault.

Damages Caused by Delays (Delayed Performance) Insured

You were unable to create the graphics your client ordered by the agreed deadline. Missing the agreed deadlines causes your client to incur considerable additional costs.

Insurance protection: The damages caused by this delay (damage caused by delay) constitute a pure financial loss, meaning they are insured.

Insurance Against Lost Sales or Lost Profit

Implementing software for a customer causes their webshop to be temporarily unavailable. They are unable to sell any products through the shop during this period.

Insurance protection: The lost turnover your customer suffers due to their webshop being unavailable constitute pure financial losses which are insured by your professional indemnity policy.

Insurance Against Violations of Rights

You design a new logo for a customer. After your customer launches the new logo, they receive a written warning claiming that the logo is too similar to an existing registered logo.

Insurance protection: Violations of rights (in this case a trademark infringement) are covered by our Professional Indemnity Insurance for Digital Professions.

Consequential Non-performance Damages Insured

You install a data backup system for a customer. After a lightning strike, the primary data is damaged and the backup you installed is faulty. A great deal of data has to be re-entered into the IT system, causing additional costs for the client.

Insurance protection: In principle, professional indemnity insurance covers all consequential non-performance damages – i.e. including pure financial losses such as costs for data reconstruction due to your failure to set up the data backup system correctly.

Expenses in Anticipation of Proper Performance

Because of delivery problems, the new archiving system is set up for your customer too late. But your client has already hired additional staff to scan and archive paper files in anticipation of the new archiving system being introduced (paperless office).

Insurance protection: Your client has to pay these temporary workers even though they can’t work. This unsuccessful expenditure are insured by your professional indemnity policy as pure financial losses.

Unlimited Pre-sale Coverage

You cause damages. But you also rendered the service before your insurance policy began.

Insurance protection: Professional indemnity insurance gives you comprehensive protection in case of damages that occur after the start of your insurance protection (so-called pre-sale cover) thanks to the claims-made damage theory. It doesn’t matter when you rendered the service, only when you are notified of the damages (claim for compensation).

There is no exclusion for hardware or software delivered before the start of the contract.

Lump sum Compensation

You agree on lump-sum compensation with your customer per week of delay for missing the deadline.

Insurance protection: Professional indemnity insurance also pays for contractually agreed lump-sum claims for compensation without concrete, demonstrable damages.

Worldwide Insurance Coverage

You publish information on your website, violating someone else’s rights (e.g. copyright or trademark infringement). You get sued before a court in the US. Background: Thanks to the so-called “territorial principle”, violations of rights can be tried in the courts of the country where the violation took place.

Insurance protection: Professional indemnity insurance automatically gives you worldwide insurance protection against financial losses in the event that claims are brought against you in courts overseas.

Note: Please note that this presentation does not form part of the contract, and is only a simplified presentation of the contents of the contract. The scope of your insurance protection is based solely on the insurance conditions agreed.