Misconduct is grounds for losing indemnity cover

A recent disciplinary case against a council member of a reputable accountancy institute has brought to attention the facts about professional indemnity insurance in relation to its members. The accused claims she qualified for indemnity under the institute’s own internal laws, which goes about insuring officers for any loss that might come about while going about their duties.

It appears that the professional indemnity insurance cover only takes effect if the officer conducts duties that s/he knows are in the interest of the institute. If duties are performed that necessitate the holding of a disciplinary hearing then the cover does not apply.

The accused was called to the hearing because she, supposedly, did not report back accurately from an executive meeting. In this case whether the inaccurate reporting was done deliberately would determine if the accused was covered by professional indemnity insurance. If the accused had made this report with the intention of acting willfully then s/he would not be covered by any insurance.

Making a case which is not in favour of the officer generally means the institute has reasonable grounds to find the person guilty and therefore, the person has little chance of being able to make an insurance claims unless the case is dismissed.

The hearing actually lasted 7 days and the accused was found to be guilty. Resulting from this was hearing costs to the accused of more than 90,000 pounds. This is money that cannot be recovered unless the accused wins a successful appeal.

This massive amount of money was incurred in one week due simply to a dispute of the contents of a number of emails. According to an industry spokesperson there had not been anything similar to this taking place for more than twenty years.

For other members of the council, this case brings to light a certain concern and that is if a member is accused of misconduct and denied the right to be protected by liability insurance then the cost of trying to clear one’s name would be prohibitive.

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