Professional Indemnity insurance may respond when a client or third party alleges that professional advice, services, errors or omissions caused financial loss. Intellectual Property insurance focuses on insured patent, trade mark, copyright, ownership and other IP disputes.
Some PI policies include limited IP cover, but the two aren't the same. A business can face both types of claims from one project. One doesn't replace the other.
At a glance
- PI focuses on claims from client work or advice
- IP cover focuses on IP rights and breach claims
- PI is mainly defensive (responding to client claims)
- IP cover may provide defence and, where selected, pursuit
- A PI policy may contain a limited IP extension
- Patents, title claims and pursuit may need specialist cover
- Contract and licence claims may be excluded under either policy
- Late notice, prior knowledge and retroactive dates may affect cover
IP insurance vs Professional Indemnity: key differences
| Feature |
IP insurance |
Professional Indemnity |
| Main trigger |
Alleged infringement, ownership dispute or insured pursuit action |
Alleged error, omission, negligence or breach of professional duty |
| Typical claimant |
Rights holder, rival, licensor or party claiming IP ownership |
Client or third party affected by professional services |
| Defence costs |
May cover approved specialist IP defence costs |
May cover approved defence costs for client-services claims |
| Damages or settlement |
May be covered for an insured IP claim |
May be covered for an insured liability claim |
| Enforcement |
May be available where selected |
Not usually a core PI benefit |
| Patent disputes |
May be specifically insured |
May be restricted or excluded under an IP extension |
| Copyright and trade marks |
May be insured |
May be covered where connected with insured professional services |
| Ownership disputes |
May be included |
Usually outside the central purpose of PI |
| Exclusions |
Negotiated exclusions and endorsements shape the scope |
Exclusions apply within each section of the PI wording |
| Notification basis |
Claims-made; notification and retroactive date apply |
Claims-made; notification and retroactive date apply |
| Contract disputes |
Commonly restricted or excluded |
Pure contractual disputes may also be restricted |
| Typical fit |
Product, software, brand, content and tech risk |
Advice, consulting, design and service risk |
The main difference is the allegation
The event alone doesn't determine which policy may respond. The allegation and the party bringing it matter.
A client says your software advice was negligent. A SaaS business implements a system for a client. The client says config errors caused lost revenue. This is primarily a PI issue because the claim is about the quality of the work.
A patent owner says the software infringes their patent. The same SaaS business receives a demand from a patent holder claiming the product uses a protected process. This is an IP dispute because the allegation concerns the product and another party's patent rights.
A campaign creates two separate claims. A marketing agency builds a client campaign using an image that a rights holder says wasn’t properly licensed. The rights holder's claim may involve IP breach. If the client also says the agency's mistake caused them a loss, a separate PI claim may arise.
One incident can produce different claims under different policies. The trigger matters.
What to check in a PI policy's IP extension
A PI policy may contain useful IP cover, but the scope should be checked rather than assumed.
1. Which rights are included? Confirm whether the extension applies to copyright, trade marks, registered designs, patents or only selected rights.
2. Must the infringement be unintentional? Deliberate or reckless breach is commonly outside cover. The wording may only respond to accidental conduct.
3. Must the claim arise from professional services? The extension may only apply when the alleged breach came from work done for a client. Claims about the business's own product or brand may fall outside that scope.
4. Are patents or ownership disputes excluded? Patent lawsuits, title claims and disputes over who owns code or designs may need specialist IP cover.
5. Is enforcement included? PI generally doesn't fund action against someone copying your IP. Specialist IP cover may provide pursuit where selected and approved.
6. What limits, sub-limits and territories apply? An IP extension may have a lower sub-limit than the main PI limit. Country restrictions may also affect overseas claims.
7. What notification and retroactive terms apply? A demand letter or ownership claim may need to be notified promptly. The retroactive date and known-issue rules should be checked.
When may IP insurance be relevant?
IP cover may be worth looking at where a business:
- Owns or sells patented products
- Develops its own software or technology
- Relies on valuable trade marks or designs
- Licences tech, content or products
- Sells products in several countries
- Imports or distributes third-party products
- Faces patent-troll or NPE exposure
- Uses contractors to build code, designs or content
- Wants cover to pursue copiers
When may Professional Indemnity be the relevant starting point?
PI may be the better starting point where the main risk is that client work causes a loss. Consultants, advisers, accountants, bookkeepers, architects, engineers, IT service providers, software implementers and creative agencies typically face client claims about the quality of their advice. Their main risk is the service, not a patent or trade mark.
Professional Indemnity Insurance's IP extension may be enough for businesses with limited copyright or trade mark exposure. Check the wording before relying on it.
When may a business consider both?
Software company with proprietary products and client services
PI may address claims about setup advice. IP cover may address patent, copyright or title claims about the product.
Marketing or creative agency
PI may address claims that client work was poor. IP cover may address claims from image, music, font or trade mark rights holders.
Engineering or product-design business
PI may address errors in design services. IP cover may address patent, design or title claims about the firm's own inventions.
Common exclusions and coverage gaps
Neither policy covers every dispute. Common issues to check include:
- Claims or issues known before cover began
- Conduct before the applicable retroactive date
- Deliberate or dishonest breach
- Pure fee, royalty or licence-payment claims
- Activities outside the declared business description
- Rights or proceedings outside the covered countries
- Legal costs incurred without required insurer consent
- Claims reported outside the notification period
- Pursuit action without the relevant cover selected
- Patent disputes excluded from a PI extension
- Title that was never properly assigned
- Fines or penalties that can't be insured by law
Intellectual Property or Professional Indemenity: which may suit your business?
| Business profile |
Possible starting point |
| Management consultant |
PI |
| SaaS company with proprietary software and client work |
Review both |
| Manufacturer with patented products |
IP review |
| Marketing agency using third-party content |
PI plus IP-extension review |
| Game studio with original code and characters |
IP review; PI if client services are provided |
| Engineer giving advice and developing inventions |
Review both |
| Ecommerce brand using supplier content and branding |
IP-risk review |
| Accountant or bookkeeper |
PI |
| Product designer licensing designs and advising clients |
Review both |
This table is a general guide only. Cover depends on the business and the wording.
Bottom line
Professional Indemnity and IP insurance solve different problems. PI focuses on claims about professional advice or services. IP insurance focuses on insured rights disputes, including infringement, ownership and, where selected, enforcement.
Businesses that both provide professional services and create, license or commercialise IP should review both policies rather than assuming one replaces the other.
How upcover can help
upcover arranges both Intellectual Property insurance and Professional Indemnity insurance for eligible Australian businesses. Options can be compared using the same activities, IP rights, countries, limits and pursuit needs so key wording gaps are easier to spot.
For an overview of IP cover, see what is intellectual property insurance. For claim examples, see IP insurance claims: examples and common scenarios.
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Frequently asked questions
Is IP infringement covered by Professional Indemnity insurance?
It may be where the PI wording contains an IP extension and the claim arises from insured professional services. The extension may restrict patents, ownership disputes, enforcement actions or claims outside the declared services.
Does PI cover copyright or trademark claims?
It may cover some copyright or trade mark claims connected with professional work. A claim about the business's own product or brand may need specialist IP cover.
Does IP insurance cover professional negligence?
IP cover is designed for IP disputes. A claim that professional advice caused a client financial loss is generally a PI issue, not an IP claim.
Can IP insurance fund action against an infringer?
It may where enforcement cover is selected. Funding is commonly subject to insurer consent, policy limits and a merits assessment.
Do software companies need both policies?
A software business may need both where it develops proprietary products and provides implementation or consulting services. The policies address different claims.
Can both policies respond to the same incident?
They may respond to different claims from one incident. A rights holder may make an IP claim while a client separately alleges professional negligence. Notify both insurers promptly where overlap is possible.
The information in this article has been prepared without taking into account your individual needs, objectives or financial situation. It should not be relied upon as personal advice. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.
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