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Need for Professional Indemnity Insurance
Professional liability arises from the failure to use the degree
of skill expected of a person in a particular field. Professional
liability insurance is insurance covering liability arising out
of providing professional services to others.
By law, professionals are required to perform the services for
which they were hired in accordance with the terms of contract.
While the first duty is primarily contractual, the second arises
from the principle of tort law.
A contractual arrangement is created, when a client hires a
professional to perform a service. When he fails to perform the
contractual obligations as promised and the client suffers harm
as a result, the injured party is entitled to be restored to the
position he would have occupied had the contract been performed
as promised.
A professional is expected to use reasonable care to avoid causing
injury to his clients in the exercise of his duties. Failure to
comply with such accepted standard of conduct exposes a professional
to liability for damage to another person. A wrongful act is established
by determining whether a prudent person, while exercising ordinary
care, would have foreseen the injury or damage that would have
naturally or probably resulted from his conduct.
Violation of duty towards a client by a professional can result
in a contract action, or a tort action, or both. A breach of contract
arises when the professional fails to perform the services agreed
to.
The professional liability coverage needs of professionals differ
according to the possible consequences of their professional acts
or omissions. Consequently, professional liability policies differ
in the types of loss they cover. The principal consequence of
a physician’s negligence is physical or psychological injury to
a patient.
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