Professional indemnity insurance covers business for costs and legal fees claimed by clients who suffered loss or damages as a result of their negligence. Figures released by the insurer Hiscox revealed that over 50% of the businesses they surveyed did not believe they required it but while companies that specifically deal in their professional knowledge and skills – think accountants, chartered surveyors, solicitors, architects and financial advisers – are required to be covered, there are many that stand to benefit from getting a policy.
With so many insurers in the market that specialise in business insurance, advertising agencies, printers and designers, to name but a few, can feel the safety of added protection and attract more customers through a policy that is affordable and easy to arrange. As shown by some high-profile cases, the alternative can be huge costs.
Sony Playstation Network
Sony might be a household name but it has endured some tough times in recent years and a particular low point came in April 2011 when its Playstation Network was hacked. The network which enables video games and movies to be streamed was shut down and run on a restricted basis for two-and-a-half months after Sony’s data centres in San Diego were compromised and 100million customer accounts were compromised. It was the second-largest data breach in American history and costs are estimated to total $173million. The Japanese electricals giant appears not to be covered.
Kaupthing Singer & Friedlander
The Isle of Man-based financial services provider Kaupthing Singer & Friedlander may not be a fraction as well-known as Sony but the losses that arose from its failure were every bit as big as the potential Playstation Network payouts. The financial advisers prompted around 1,500 investors to buy over £250million of KSF’s offshore bonds but faced huge claims when it collapsed in light of the Icelandic banking crisis and it was ruled that bonds were not covered by the £50,000 Manx depositors’ protection scheme. Some individuals were left with losses of over £200,000.
Richard O’Dwyer started website TVShack.net to help pay his way through university but in January 2012 faced extradition to the USA for copyright infringement. The site provided links to films and TV shows and was hosted on a UK server where there were no copyright issues, and O’Dwyer did not leave the UK. But because .net domains are routed through American infrastructure, the claim that the case can be considered under US law was upheld. O’Dwyer, who did not have a professional indemnity policy, will face legal costs even if his appeal against extradition succeeds. If it does not, he could be forced to pay damages.