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Professional Indemnity Insurance for Psychologists

Written by

Shaun McGowan

As a Psychologist you are working with extremely vulnerable clients who are relying on your advice and support to help them overcome challenges in their lives. Your clients may make significant decisions based on your advice, and it is very hard to pinpoint the results. If they are unhappy with the outcome they could blame you, whether or not this is reasonable.

Psychologists deliver a huge range of services, from training and education sessions to individual, group or family counselling and mediation. Depending on the type of services you provide there are a number of risks you could face. For example:

  • If you offer mediation or relationship counselling services, one or both parties could be dissatisfied with the results of negotiations and claim that you did not act impartially.
  • Personal counselling clients could claim that following your advice made their situation worse.
  • If one of your patients were to harm themselves or others, they or their family could seek to hold you responsible for not identifying the risk, for misdiagnosing their condition or for providing inappropriate treatment.

In addition, as a Psychologist you have a very duty of strict confidentiality. If you or one of your employees were to accidentally disclose information that compromised the privacy of one of your patients, the consequences could be severe both for them and for you.

Why do Psychologists need professional indemnity insurance?

In order to practice as a Psychologist in this country you need to register with the Psychology Board of Australia (PsyBA), which is the body that regulates Psychologists under the Health Practitioner Regulation National Law Act. One of the conditions of registration as a Psychologist is that you have professional indemnity insurance in place that meets the PsyBA’s registration standard. This means your policy must have:

  • At least $2,000,000 cover for any one claim.
  • Unlimited retroactive cover, to protect you against claims made relating to services provided before the insurance was purchased.
  • At least seven years’ run-off cover, to protect you against claims made after the cover lapses but relating to services provided during the period when your policy was in place.
  • At least one automatic reinstatement of cover, so you will still be insured if someone makes a claim against you.

Your professional indemnity insurance is required to protect both you and your clients. If they suffer financial losses as a result of your actions or advice, PII enables them to recover those losses regardless of whether your practice has sufficient resources to compensate them. It also protects you against the risk of claims against you (whether justified or unfounded), which could severely damage your business and reputation, providing you with the resources to mount a legal defence against the claim.

What does professional indemnity insurance cover?

Your public liability insurance covers you if a client has an accident on your premises, or if you accidentally injure someone else or cause damage to their property. However, it won’t protect you against claims of professional negligence, or if one of your clients suffers a financial loss as a result of something you do or say. For this you need professional indemnity insurance.

Your PII policy covers both your legal costs if you need to defend yourself against a negligence claim (whether or not that claim is upheld), and any damages that are awarded against you if the claim is upheld, up to the limit of your policy.

Your legal costs may be inclusive (which means they will be deducted from the limit in your policy) or in addition (meaning that the full policy amount is available to pay any financial compensation awarded to your clients, with legal costs paid on top).

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How much is professional indemnity insurance for Psychologists?

How much you pay for your professional indemnity insurance will depend on on a number of factors, such as:

  • The annual turnover of your practice
  • How much cover you want to take out
  • Where your practice is located (the level of stamp duty varies in different states)
  • Whether you have made a claim under PII insurance before

To meet requirements of the PsyBA your policy must include run off cover for at least seven years, unlimited retroactive protection, and at least one ‘automatic reinstatement’ of your policy (meaning that you will still have cover after you make a claim). If you want a policy with more than one automatic reinstatement, this will increase the cost of your PII.

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Professional indemnity insurance case study

A Psychologist treated a professional client for a severe anxiety disorder. The client held a senior management position. The Psychologist provided counselling services and advice for a period of seven months.

The Psychologist arranged for some useful literature to be emailed to his client. Unfortunately the administrative assistant accidentally emailed the documents to a work email address rather than her personal address. The client had specifically requested that no personal information ever be sent to that email account as it was was accessible by a number of her colleagues, including her boss. Shortly afterwards the client was passed over for promotion, and she believed this was because her anxiety condition had been revealed to her employer, which had undermined her credibility. She decided to sue the Psychologist for breach of confidentiality and loss of future income, and simultaneously sued her employer for discrimination.

The claim for breach of privacy was upheld and damages of $23,000 were awarded against the Psychologist. However, the discrimination charge against the employer was dismissed, as they were able to provide clear evidence for their choice of an alternative candidate. As a result the claim against the Psychologist for loss of future income was also dismissed, since the confidentiality breach was not found to have had a bearing on the client’s lack of promotion.

In addition to the $23,000 damages the Psychologist incurred $32,000 in legal costs while defending the case. These costs were covered by his professional indemnity insurance, and he paid an excess of just $[xx] on the claim.

List of Psychology services that need professional indemnity insurance

In order to offer any type of service as a registered Psychologist in Australia, or provide support and advice on any of the following subjects, you must first register with the Psychology Board of Australia and take out adequate professional indemnity insurance:

  • Anger management
  • Anxiety and panic
  • Bereavement
  • Depression
  • Drug & alcohol addition
  • Eating disorders
  • Fear and phobias
  • Gambling addiction
  • Grief and loss
  • Hypnotherapy
  • Managing stress
  • Marriage guidance
  • Mediation
  • Mindfulness
  • Parenting
  • Personal counselling
  • Post traumatic stress
  • Pregnancy counselling
  • Relationships and sexuality
  • Sleep disorders
  • Trauma

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About the Author

Shaun McGowan from money.com.au

Shaun

McGowan

Shaun McGowan

Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.

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