Getting the right kind of cover and protection is essential for any business, from insurance if there is a break-in and theft of equipment, to protection if the company faces legal action. Professional indemnity insurance is a type of policy taken out by many businesses and individuals who offer their advice on a professional basis. Premiums are often linked to the maximum payout limit, and all types of this insurance cover someone’s legal costs in the event they are accused of making a professional mistake.
Professional indemnity insurance is sometimes simply referred to as PI or PII, and is traditionally popular with those who offer their services on a consultancy or contractual basis. In the past this has often mainly meant the likes of private doctors, architects and graphic designers.
However, the modern business is now more aware of legal issues than ever, and may be more minded to seek legal action if they feel they have lost money because of a mistake in a consultants work or advice. Therefore the dilemma can apply to the likes of management consultants, IT contractors and health and safety advisers – in fact just about anybody who provides their advice on a professional basis.
Indemnity cover is an insurance policy which pays for your legal defence if you face a formal legal challenge that you made a mistake, error, omission or committed an act of negligence in the course of your business.
Defending a case and hiring a solicitor can be costly so many policies have high maximum payout limits, sometimes for millions of pounds, although such high levels won’t be needed by every type of firm. It is usual to find indemnity insurance which protects against other things including claims of defamation, unintentional copyright infringement, and accidental breach of confidentiality.
Professional indemnity insurance typically involves a premium related to the type of business which is being insured, and the types of client and contract it deals with. However, the policy applicant typically also has to decide the maximum payout limit – which would cover legal bills and any compensation order in the event of a claim – so getting this level right is important. But remember provided someone typically stays within the limit they are entitled to the payout however far through the court system their case got – even to the high court if needed.
Management consultants professional indemnity insurance in its simplest forms pays for the policyholder’s legal costs in the event they are sued for an error committed in their business – but normally it can go much further than that. Depending on the deal it can include various extras and some insurance companies even tie in other forms of cover in with it for an overall package price.
Checking what a deal will actually pay out for is important – normally it is expected to cover legal bills in the event of an accusation of a mistake, omission or act of negligence. This often also includes claims that a consultant has lost or damaged data or documents belonging to a client, or that they have unintentionally defamed someone and therefore face being sued for libel.
Deals frequently protect not only the cost of hiring legal help to defend a case – which in some circumstances can be a massive expense, but also typically cover the cost of compensation should it be awarded against the policyholder who loses a case. The maximum payout limit on a policy is therefore important and is often down to the policyholder’s own judgement. This can be based on the size of the consultancy firm, its clients and the size of the contracts it is asked to undertake – some firms may require higher cover levels, and therefore may pay higher premiums, than others.
Insurers may offer some extras with management consultants professional indemnity insurance including public liability insurance either as an optional extra or as part of the price.
A few other features can be useful too. A common one is what is known as retroactive cover which means the cover will pay out if the policy holder faces a legal challenge in future which relates to something so historical it happened before the insurance was taken out.
For example a management consultant may be hired by a firm in March to provide a series of training sessions to senior staff. The job might be completed and payment processed with the client apparently happy. Then in April the consultant might buy an indemnity insurance deal with retroactive cover and in June get a claim in the post relating to the March assignment which the client says involved advice which actually lost the firm money. Provided the policyholder had no prior notification they were going to face the claim, they may be covered as they would be had the incident itself happened after the policy was purchased.
Management consultants professional indemnity insurance may also offer a run off cover option – this refers to protection which can continue for a period of time even after a consultant has ceased trading, retired or changed jobs. The risk of legal action relating to a past contract does not go away simply because someone has left their position, but remains for a period of time after the event.
Few of us go through personal and professional life without making a mistake – slip ups are a fact of life, even with the best training and preparation there is. Errors while working as a consultant can be costly because of the work a management professional takes on – perhaps becoming an interim boss for a section of a company or being hired to make important recommendations of efficiency. As such management consultants insurance is often taken out as a crucial safety net by firms and individual freelances alike.
Professional cover normally relates to protection against legal threats, and this normally refers to things like public liability insurance and professional indemnity cover. Public liability is perhaps better understood than indemnity protection – being a legal requirement for many firms that operate in public or have members of the public on their premises on a regular basis.
Professional indemnity, on the other hand, will usually cover the cost of legal defence in the event you face being sued by a client – typically due to a costly mistake, error, or omission – circumstances not protected by public liability cover.
To give an example, a management consultant might be hired by a firm with a high number of sales staff to give advice about how they can improve their sales figures through various customer relations techniques – if numbers actually worsened after the assignment the firm may blame the consultant and take legal action.
Management consultants insurance typically covers the policyholder whether they are to blame or not – a payout is not normally conditional on the claim being valid. Furthermore, even if the policyholder loses the case, the insurance may even cover the cost of any compensation awarded against them, up to the policy limit.
The top limit on a plan is decided when the insurance is taken out and is important because it represents the maximum amount an insurance company will pay out towards legal defence and compensation – larger firms may need protection for millions of pounds, while smaller companies dealing with smaller clients may need a limit far smaller.
Management consultants insurance normally covers claims of errors, omissions, acts of negligence and also things like claims of unintentional breach of confidence or copyright, allegations of defamation and even the claim a consultant has acted dishonestly – this means some of the more common legal risks are less of a threat to a business with a straightforward insurance policy.
Tax, premises and staff are often the things normally associated with being the tricky parts of setting up a business. IT consultants are just the same as any other outside firm in terms of sorting out their admin and deciding what exactly they need to make a solid start. IT consultants insurance is also available and is often a straightforward way of protecting a firm from common legal threats.
Professional insurance like this has emerged because of the very real risk of being taken to court by a client in the event you or an employee of yours makes a costly mistake on a job. Money can be lost by simply failing to back up data or making an error which keeps a website down for even just a few hours. As such a client may take legal action to recover what they have lost if they think the error was your fault.
IT consultants insurance normally comes with what is referred to as professional indemnity cover which will pay out in the event of such a legal challenge, IE you or your company is sued.
In some circumstances an apology and an agreement to fix the problem can be enough but sometimes a case can emerge which would otherwise cost a firm thousands of pounds to defend and could also result in compensation being awarded in favour of the client.
Indemnity cover will often protect a consultant regardless of whether or not the claim against them is true – and will protect the firm regardless of the result of the case. Typically it will pay for the cost of hiring legal help to defend the case and will also cover the cost of compensation.
A deal normally protects against accusations a consultant has made a costly error, omission, or even committed an act of negligence in the course of their work. Often protected are formal claims a consultant has lost a client’s data, unintentionally defamed someone, or accidentally breached confidence or copyright. Public liability insurance may also be included.
The cost of the premium for this kind of insurance will often depend on the company’s size, its type of client and the qualifications of its staff. All policies also come with a maximum payout limit – the highest amount the insurance will pay out towards legal costs and compensation, which can typically be named by the applicant.
This is important because a level of IT consultants insurance which is too low can see someone end up under-insured and picking up any gap in cost themselves, while a level which is too high can result in a premium which is too expensive and is for a level of protection someone does not really need.
From internet marketing to installing wireless networks, there are now all sorts of reasons why firms might require outside help with information technology – and that means getting in consultants either for the short or long term. Even smaller companies or individual freelances can make a big difference to a company, but they themselves will need to make sure they have planned ahead to provide a good service – one of the first things many consider is IT contractors insurance.
Professional cover is taken up by businesses to protect against all sorts of eventualities. Depending on where and how they operate some firms will need public liability insurance, for example, while others won’t. Others will need a form of professional indemnity insurance, which can protect against legal hurdles which can come up when completing consultancy work.
IT contractors insurance can include both public liability and professional indemnity in one policy and can come from a wide range of insurance firms. All deals which include professional indemnity often run along the same basic principle – paying out in the event the individual firm or policyholder faces a legal challenge.
This is often referred to as being sued and can happen for all sorts of reasons. Normally a deal with professional indemnity protects the policyholder in the event they face action due to a costly mistake, typically because it lead to a client losing money.
Typically this is defined as an accusation of an error, omission or act of negligence committed in their day to day business. It also normally applies to claims they have breached copyright, confidence, or even if they have defamed someone through libel. Also normally covered are claims that a client’s data has been lost or destroyed or even that the employee of a contractor has acted dishonestly.
Insurance like this works by paying out to cover the legal and compensation costs arising from a case – which in some cases can run to hundreds of thousands of pounds or more. IT contractors insurance will therefore involve a premium as with other kinds of cover but this is calculated according to the maximum payout limit on the policy and the size of the applicants business and clients.