29 Oct 10
On PI insurance
MEMBER 329 writes:
"The Tax Practitioners Board, like most regulators, does not understand what Professional Indemnity Insurance concerns.
PI insurance is taken out by professionals in order to protect the professional against a claim of professional negligence by the professional's client. Its purpose is not to protect or indemnify the client. Most PI policies contain wording that fraud by the professional is not covered.
When a claim is made it is paid to the professional and not to the client. The PI insurance normally also covers the legal costs of the professional.
Thus, if the professional is insolvent the trustee in bankruptcy or liquidator will make the claim and no one knows what these fine people will do with the proceeds.
Professionals usually belong to a scheme under Professional Standards Legislation that limits liability.
PI insurance has nothing to do with protecting the interests of clients."