Professional indemnity insurance Title

This case study explains how every professional is at risk of being sued for their mistake while performing their role. Lawsuits can arise from anywhere due to negligence, intellectual property, misrepresentation and more. These lawsuits can ruin a business financially and damage its reputation. Professional indemnity insurance provides coverage for professionals and companies to protect against negligence claims from clients or customers. Professional indemnity insurance (PI) is an insurance that can save a professional and a business from various claims and unfortunate situations.

Background of Client

Our client is a marketing agency in Hong Kong that works with various brands and operates their marketing strategies. In addition, they help many clients create and execute their offline and online marketing.

As an out-house marketing agency, they are always at risk of claims. These include clients not satisfied, advertisements offending the public due to misrepresentation and even common cases of intellectual property claims. These possible risks are why most agencies and businesses buy professional indemnity insurance.

Professional liability policies will cover the insured against loss from any claim(s) made during the policy period. Claims covered by a professional liability policy can include damages caused by the professional’s actions or things that the professional should have done.

Client Problem-Situation

The client had just signed a contract with a makeup brand. The makeup brand gave the client the assignment to create and handle their marketing duties and provided them with a budget. This included a large amount as the brand wanted its advertisement to reach a large crowd. 

The marketing agency decided the best way to reach the number of customers the brand required was ‘Static Outdoor advertisement’. ‘Static Outdoor advertisement’ is a large billboard in a popular location to attract views and possible leads. The brand agreed to pay the marketing agency HKD 60,000 for the billboard for a month ( average monthly rent of a billboard in a location like Time Square).

The agency was in charge of the outcome and had released the design to the billboard company. However, as the brand representative visited the billboard site, they noticed the number printed to contact the company was wrong and was, in fact, a competitor’s number.

The brand now had the right to sue the marketing agency for its negligence. The court decided that the agency had to return all their money, pay compensation costs, and fix the problem. This would cost the marketing agency a large amount of financial loss and possible reputation damage.

How Professional Indemnity Insurance was a Solution?

Professional Indemnity InsuranceThankfully the marketing agency had purchased PI insurance from Red Asia Insurance. This insurance saved their company and allowed them to pay all related costs. In addition, professional indemnity insurance provided the marketing agency with the cost of the claim and defence.

The insurance also provided the costs of fixing their error and helped protect their reputation. Therefore, the business avoids significant financial loss, which let the agency focus on future projects.

Below are the calculated costs that insurance paid the marketing agency:

  • Legal Costs: HKD 80,000 (8-10 hrs)
  • Return of funds: HKD 60,000
  • Commission costs:HKD150,000
  • Advertisement Correction costs: HKD10,000 

Total Cost: HKD 300,000

Professional indemnity insurance provides a perfect cover to every business that offers a service to clients or customers.


PI insurance is not only needed by businesses; it is also a common insurance bought by freelancers. However, this insurance should be purchased by all companies and professionals.

How careful a business or professional is mistakes happen; some lead to lawsuits. Unpredictable claims are why companies or individuals need insurance to be prepared for such claims. PI  insurance can avoid the financial and brand-damaging risks associated with errors and omissions claims.

Even if the business has done nothing wrong, there is still a chance a client will sue your company. If they believe you made a mistake. A business without coverage may not recover from the significant financial loss.

To Learn More about Professional Indemnity Insurance and get the best protection for professionals, contact Red Asia Insurance.