A form of third-party insurance that covers a professional person, such as an accountant or auditor, against paying compensation in the event of being sued for negligence. This can include giving defective advice if the person professes to be an expert in a given field. There have been a number of very high awards made to plaintiffs (especially in the USA where PII is known as malpractice insurance) and this has greatly increased the cost to the accountant of obtaining cover.
One solution is for accountants to form corporations rather than the traditional partnerships, thus reducing their exposure to personal liability. In the UK the Limited Liability Partnership Act 2000 now enables partnerships to claim the advantages of limited liability. See also incorporation of audit firms.