Professional indemnity insurance for registered professions, in particular lawyers, notaries, tax advisors, etc. is mandatory. It is a commonly referred to with the acronym “PI” in English.
The German market is characterised by a clientele that depends on established insurers and known insurance solutions to cover professional indemnity requirements in relation to “breaches”. It is difficult for new risk carriers to position themselves in the market, so that the competition is quite restricted. This is evident in the long life cycle of products, whereby, in contrast to D&O insurance, the market is mainly dominated by conditions imposed by insurers rather than brokers. This market is also characterised by largely constant premiums.
In practice, the area of so-called “property cover” is often relevant in addition to the master cover. This is frequently a sensitive issue in procedures following an insolvency order or when dealing with larger clients. Speed, binding information and direct access to underwriters are essential in this context.
What is insured?
The insurance covers the statutory third party liability of the policyholder for a breach when performing professional duties. The amount of the insured sum must at least correspond to the legally required insured sum according to the relevant professional code. It is necessary to consider various criteria, e.g. the legal status of the legal person or any special features of an interdisciplinary professional community.
Who is insured?
It is first necessary to differentiate between policyholders. If the insured party is an individual natural person, he/she is the professional and policyholder. In the case of legal entities, such as a law firm with limited liability, or partnerships, such as a law firm that is a private corporation, this is the business itself. The associates or partners, executive officers and directors who work for companies in the various corporate forms, as well as a company’s employees, are insured. The insured work is the specified professional activity of the insured persons, e.g. as a lawyer and/or tax consultant.
Who provides the insurance?
The market of providers is modest in size. There are about a half dozen serious insurers which differ greatly in terms of their underwriting policy. Two providers dominate the market and can call on capacities measured in hundreds of millions. This is very helpful when dealing with large account enquiries.