ABSTRACT
Insurance arose for the purpose of restoring the victim of an uncertain and unpredictable event, as far as is possible, to his or her original position. The idea of insuring against third party liabilities came relatively late, but liability cover is now a crucial element in all forms of insurance activity. One of the main features of third party liability insurance is the fact that it belongs to the general area of indemnity insurance. Professional indemnity cover is a significant sub-species of third party liability insurance. Professional liability may arise from the failure to comply with statutory provisions, contractual obligations or common law rules. A professional indemnity policy will extend to coverage for defence costs. The nature of indemnity insurance demands that there be additional contractual terms in place so as to prevent either a spontaneous acceptance of liability on the part of the insured or a default by the insured in exercising their professional obligations.
