Professional indemnity insurance is held by a professional person to ensure that any claims of professional negligence made against the professional person can be met. To put it another way, there is not much point in suing a professional person if they do not have enough money to pay for your loss – so professional indemnity insurance comes in to cover the cost.
Every lawyer is required to hold professional indemnity insurance. This means that if your lawyer gives incorrect legal advice, or fails to give legal advice where legal advice is required, you will be safe. As far as real estate sales and conveyancing matters are concerned, every aspect of the matter is covered. (See also Fidelity Insurance.)
In the case of a licensed licensed conveyancer, professional indemnity insurance will only meet a claim of negligence where the licensed conveyancer has failed to properly perform conveyancing work to the standard of a reasonable and competent licensed conveyancer.
If, however, the licensed conveyancer provides legal advice, but gets it wrong, the insurer will not meet a claim based on the resulting loss. This is because the insurer will not cover illegal acts (it is illegal for a licensed conveyancer to perform legal work or give legal advice that falls outside the narrow definition in the Conveyancers Act 2006), and also because illegally providing legal advice is not something that a reasonable and competent licensed conveyancer
For further information see "Licensed Conveyancers – PI Insurance Problems"<
Commission estate agents carry insurance in relation to professional negligence relating to their introduction services only. They do not carry any insurance for legal advice or legal work associated with the sale of real estate. This is because the commission estate agent must always refer legal matters and issues to the client’s lawyer (who DOES carry insurance cover for legal matters).