Over the years, the types of businesses who purchase Professional Indemnity Insurance has changed. Where once it was only doctors and lawyers, Professional Indemnity is now the generic reference to insurance which deals with financial loss arising from, in this context, a Principal's reliance upon the service provided, and is a potential purchase by any professional providing advise.

In the event that the Principal suffers financial loss as a result of alleged neglect, error or omission, Professional Indemnity Insurance addresses the cost of defending claims and any damages payable.

The type of service provided is the key determinant of whether Professional Indemnity Insurance required.
The test of when Professional Indemnity Insurance is required by a service provider does not turn directly on a particular description of the service provider's business. The criteria one should apply is found in the nature of the service, not the profession per se. What the service provider is doing for the Principal will determine the exposure and an assessment of the risk will identify the extent of professional indemnity insurance required.
To compound the service provided question, the insurance industry segments its liability insurance offerings into, in context, public liability, products liability and professional indemnity policies. Thus it is possible that the service provided may involve the need for all three types of insurance - as typified by an IT consultant.
As general rules, the following distinctions can be used to test which policy should be required of a service providers.
Public Liability and Products Liability insurances are primarily designed to address the personal injury or property damage that may arise from the service providers activities. In other words they deal with the physical outcomes of faulty services.
Professional Indemnity insurances are primarily designed to respond to the financial loss arising from faulty advice, design or specification by the service provider. The design engineer or management consultant upon whose advice or design the Principal or the Principal's customers rely upon, is the Professional targeted by PI Insurance.

In the current environment a "professional" is a term that is not limited to a specific learned and skilled profession such as doctors and lawyers, it can also refer to one belonging to an occupation such as a trade ie. an electrical engineer provides advice in respect to electrical wiring, bodily injury or property damage could result if the wiring is incorrectly placed. A financial loss, could arise in the cost of replacing the electrical wiring.
To adequately distinguish if an exposure of a professional nature exists that would have the effect of causing a financial loss the exposures presented by each profession and/or occupation need to be assessed. Consideration should therefore be given to the following points:
(a) Is a Professional Indemnity Insurance policy required
A professional can be defined as: "A party who has acquired through learning, specialist knowledge and experience, and who professes to exercise those skills generally for a fee in giving advice in the affairs of others".
A professional must have some special skill or ability, or some special qualifications derived from training or experience.
Being deemed a Professional places the individual or company in a position where they owe their client or prospective client a duty of care.
The common law requires a professional to provide a reasonable standard of care to an appropriate level expected by their profession. As professionals are involved in activities requiring a specialist skill or knowledge, they must not only exercise reasonable care, but will also be judged on the standards appropriate to that activity.
If a Professional breaches his/her duty of care, whether in a profession or occupation, it must be determined whether the duty is owed in a professional capacity and whether a financial loss has resulted from the breach. This result would depend upon the circumstances giving rise to the situation which caused the breach, and the duty of care may be owed by a wide range of people depending on the work performed and its size, While there are many circumstances where it may be easy to determine whether or not a professional indemnity insurance policy is required, border line cases can and will arise. Whether or not professional indemnity insurance cover should be granted in such circumstances will depend on the experience, qualifications and/or skill held by the professional, the scope of the activities and whether any advice is provided and for what fee.
(b) Is a Professional Indemnity Insurance policy required - "What are the exposures presented by that particular Profession?" Each profession and/or occupation brings with it a different set of exposures and can experiance different types of claims. To adequately distinguish between risks, and whether a Professional Indemnity insurance policy is required, a clear picture of the exposures presented by each profession needs to be established. The exposures can be assessed by having the applicant submit details confirming a clear description of their activities and/or any advice provided in their profession and/or occupation.

Management Liability Insurance covers both the company and its directors & officers for costs associated with defending actions brought against them by employees or third parties. The key elements to the cover are as follows:
Employment: Covers the Company for claims alleging an Employment breach including wrongful dismissal, discrimination, harassment, deprivation of career opportunity, breach of contract etc.
Crime: Covers the company for theft by its employees.

Taxation Investigation: Covers the company for Professional Fees incurred in responding to a Tax Investigation.

Directors & Officers: Covers the Directors & Officers for any claim alleging a Wrongful Act (negligence, breach of duty, misrepresentation) by a Director or Officer.

Company Cover: Covers the Company for a claim against the entity alleging wrongful acts.

Trustee: Cover for the trustees for a wrongful act in the administration of a staff superannuation fund.

Although you may consider that an allegation against the company or its directors by an employee or third party is completely baseless or without merit, without insurance you leave yourself exposed to expensive and time consuming litigation to successfully defend any allegation.
Following are some examples which highlight the exposures and why Management Liability (inc. Directors & Officers Insurance) is important:
Claim: Employment Practices Liability - Wrongful Termination
Insured: Privately held company with 19 employees and an annual revenue of $3.7 million.
Scenario: A supervisor was terminated by his employer for smoking in a restricted area of the building. The terminated employee sued his employer for wrongful termination based on age discrimination from comments made by his supervisor such as "you're too old". The employee further alleged he could only be terminated for good cause, although he had a history of poor performance issues. The dismissed employee sought back pay, front pay, damages, and legal fees totaling an estimated $275,000.
Outcome: The employer settled with the dismissed employee for $350,000 and the employer also paid $130,000 in defence costs.
Claim: Crime - (Altered Cheques)
Insured: Wholesaler with a staff of 86 employees and an annual revenue of $15 million.
Scenario: A debtor clerk misappropriated $200,000 by altering cheques received from debtors. The clerk named themselves as the payee, and continued a cycle of paying debtors accounts with funds from other debtors over a period of eighteen months. This continued until her absence from work when the fraudulent scheme was discovered.
Outcome: Total loss to the wholesaler amounted to $300,000.
Claim: Unfair Competition
Insured: Privately owned Company, employing 20 people and an annual revenue of $650,000.
Scenario: CEO of privately held company left to start a new software company and was subsequently sued individually as an officer of the new company by his former employer. The allegations included trademark infringement and unfair competition as the former employer claimed that he had taken a corporate license to market a particular software product.
Outcome: Defendant settled for a payment of $250,000 and expenses of $130,000.