What professional indemnity does not cover?

Professional indemnity insurance (also called PI or E&O insurance) is designed to protect your business from claims arising from professional errors, omissions, or negligence.

However, there are important exclusions you should know. PI insurance doesn’t cover:

• Deliberate or criminal acts

• Bodily injury or property damage (except in specific cases)

• Contractual disputes

• Employee claims

• Known issues before the policy began

Understanding what your policy does not cover is just as important as knowing what it does.

Why Exclusions Matter

Many businesses falsely assume their PI policy covers “everything.” But insurance works on clearly defined terms.

Knowing your exclusions:

• Prevents unexpected claim denials

• Helps you close coverage gaps with other policies

• Protects your business from catastrophic financial loss

If you only rely on professional indemnity, you may be exposed to risks you didn’t even realize existed.

Common Exclusions in Professional Indemnity Insurance

1. Intentional or Criminal Acts

Professional indemnity insurance is designed to cover negligence, not deliberate wrongdoing.
If a business owner, employee, or contractor commits fraud, theft, or intentionally harms a client, the insurer will not pay out.

Examples:

• Knowingly giving false advice to a client.

• Falsifying documents.

• Embezzling client funds.

👉 These are legal matters, not insurable risks under PI.

2. Bodily Injury and Property Damage

If someone slips and falls in your office or if your work damages a client’s property, PI insurance won’t cover this.
These claims typically fall under general liability insurance, not professional indemnity.

Example:
A client visits your office, trips over a cable, and breaks their arm.

• Not covered by PI.

• Covered by general liability.

Many businesses choose to carry both PI and general liability to avoid these dangerous coverage gaps.

3. Contractual Disputes

If a client claims you breached the terms of a contract (e.g., missed deadlines, delivered a different product, or failed to meet specific clauses), professional indemnity insurance may not apply.

Why? Because insurance covers negligence, not failure to fulfill contractual promises.

Example:
Your contract promises a website with 25 features. You deliver 20. The client sues.

• Not a PI claim.

• It’s a contractual dispute.

4. Employment-Related Claims

Professional indemnity insurance doesn’t cover internal disputes with employees or contractors.
For that, businesses need EPLI (Employment Practices Liability Insurance).

Examples of claims not covered by PI:

• Wrongful termination

• Discrimination

• Harassment claims

• Failure to promote or hire

5. Known Circumstances Before Policy Start

Insurance protects against future risks, not past problems.
If you knew about a potential issue or claim before buying the policy, your insurer can deny the claim.

Example:
A client threatened to sue you a month before you purchased PI insurance.

• Any resulting lawsuit will not be covered.

This is why it’s crucial to start coverage early — before claims arise.

6. Intellectual Property & Defamation

Most standard PI policies don’t cover defamation, slander, libel, or copyright infringement unless it’s specifically added as an endorsement.

Examples not covered by default:

• Using copyrighted photos on your website

• Defaming a competitor in a presentation

For these risks, businesses often add media liability or cyber liability insurance.

7. Product Liability & Recalls

If your product causes harm, or if you need to recall it from the market, PI insurance won’t step in.
Product issues are covered by product liability insurance, which protects manufacturers, distributors, and retailers.

Example:
A faulty part you produced causes property damage.

• Not covered by PI.

• Covered by product liability.

Other Situations That May Not Be Covered

• Punitive damages — many policies exclude them entirely.

• War or terrorism — typically excluded unless added via a special clause.

• Cyber incidents — need cyber insurance for full protection.

• Fines and penalties — insurance rarely covers government fines.

How to Protect Against Coverage Gaps

By combining PI insurance with other policies, businesses can build a complete protection shield.

How Much These Gaps Can Cost You

• Slip-and-fall claim → $20,000 average settlement

• Employment lawsuit → $75,000+ average cost

• Copyright infringement → $30,000+

• Cyber breach → $200,000+ for small businesses

A single uncovered claim can bankrupt a small company. That’s why smart owners layer their insurance strategically.

Why Work With Toby Hansen Agency

Toby Hansen Agency searches nearly 100 carriers to find the lowest price with the most coverage — and helps you identify coverage gaps before they cost you money.

With over 30 years of experience, our team:

• Reviews your exposures

• Customizes PI and complementary coverage

• Ensures no hidden exclusions surprise you later

• Delivers quick quotes and proof of insurance

Final Thoughts

What professional indemnity does not cover is just as important as what it does.

PI insurance won’t protect you against:

• Intentional acts

• Physical injuries

• Contract disputes

• Employment claims

• Known issues before coverage

For complete protection, combine PI with general liability, EPLI, cyber, or product liability insurance — depending on your business type.

👉 To get your customized professional indemnity insurance quote, fill out the form below.
Let Toby Hansen Agency make sure no gap is left uncovered.