Although a consultant or contractor typically does their best to complete jobs in good faith and to the best of their ability, it is almost inevitable that disputes of some form will arise from time to time. Although in many cases arguments can be sorted out amicably, sometimes clients can be minded to take legal action. This is why many professionals decide to have professional indemnity insurance in place as a safety net.
Imagine a management consultant making a series of recommendations which later turn out to actually harm a business rather than help it, or a computer contractor installing a network which crashes and loses a company money. These are brief examples of when the professional’s client may decide to sue.
This will mean defending a case in the courts, and civil actions are notoriously expensive when it comes to hiring a legal defence. Furthermore, if the case is lost there is always also the chance that compensation could be awarded in favour of the complainant.
Professional indemnity insurance, often referred to in business circles as PII, will typically pick up a policyholder’s legal bills in the event they are sued. This means they are effectively protected against massive legal expense in the event of a court case.
This kind of insurance normally protects against claims that the policyholder has committed a mistake, error, or act of negligence in their general day to day business. It can protect an individual contractor or a firm with a number of employees as a whole.
Normally a basic policy will also protect against claims someone has breached confidentiality or copyright accidentally, or even that they have defamed somebody through libel.
While hardly guaranteed, these circumstances are all real risks which can have massive financial implications for a business which does not have professional cover.
Professional indemnity insurance normally features premiums which are based on the size of the maximum payout on a policy, ie the highest amount the insurance company is prepared to pay towards legal costs and compensation in the event of a claim. This can be hundreds of thousands of pounds for smaller businesses or millions for larger firms.
The work of a management consultant can be high-pressured and high-profile. But it can also involve high rewards both financially and professionally. However, the job also carries a degree of risk along with the pressure. As a perceived expert in their field, a consultant is expected to do a job which delivers results, and if a client feels they have fallen below this standard, they can take legal action. This is why many people working in the sector take out management consultants professional indemnity insurance.
Professional indemnity insurance, sometimes referred to by insurers as PII, is a form of cover which typically pays out in the event the policyholder faces legal action. It is different to employers’ liability insurance and public liability insurance, in that it applies in the event the policyholder is sued due to a mistake which has cost a client money.
For example, the client may decide to take legal action because a restructuring programme drawn up by a management consultant has actually lead to the company losing money rather than saving it. This is often referred to in the business as suffering a financial injury and the aim of the client is to recover what they have lost through court action.
This will often mean hiring legal help to defend a case which can be expensive. Management consultants professional indemnity insurance will pick up the cost of the legal defence and even any compensation if it is awarded against the policy holder.
The benefits of this are obvious as in some circumstances legal bills can spiral out of control during a civil court action. Professional indemnity insurance will typically protect the policyholder whether or not the claim against them is valid and will even pay for the cost of compensation. Protection applies right the way through the courts system all the way to the High Court if needed, provided somebody stays within the policy limit.
This limit is set when the policy is taken out by the policyholder and companies which have large client lists and considerable turnovers may want protection for millions of pounds, while smaller companies will not need this.
It is also possible to arrange useful extras on a policy, such as an excess, or protection which will apply to any new legal claims which refer back so far they apply to something which happened before the policy was even purchased, known as ‘retroactive cover’.
Management consultants professional indemnity insurance is therefore seen by many as a crucial safety net and method of protecting against the considerable financial risks of a legal action. Premiums are priced according to the policy limit and can also be affected by the professional’s qualifications and experience, meaning a deal is available for every level of consultant.
When setting up a business and running quite close to the wire as far as finances are concerned, it can be tempting to avoid extra costs such as professional indemnity insurance. However, even well-trained and well-prepared management consultants can face legal action, which can typically be costly and stressful to defend. Management consultants insurance need not be overly costly and can provide a crucial safety net if a professional ever does face legal action.
Without cover a management consultant runs the risk of facing massive legal bills should they face a formal action. This may seem unlikely but a simple mistake in either a consultant’s direct work or in the advice they pass on to a client can be costly. Depending on the error, a client can launch a legal action which will cost thousands of pounds to defend with professional legal help.
Worse still, if the case is lost a consultant can also be faced with a vast compensation bill. Management consultants insurance which includes professional indemnity cover can pick up the cost of legal defence and even the cost of any compensation which is awarded.
In essence it will typically protect the policyholder’s financial circumstances, potentially saving them a bill of hundreds of thousands of pounds or even more in some circumstances. Although it is by no means certain a consultant will face a legal action at some point in their career, being sued is a real and genuine threat.
In exchange for a premium indemnity cover typically guarantees your legal bills will be paid up to a set policy limit in the event you face a claim you have made a mistake, committed an act of negligence or simply omitted something by accident in your work.
Crucially, a management consultants insurance payout is not conditional on the claim against you being false. Even if you have made a mistake, provided it is genuine and not malicious, the insurance will still pay out. Also covered on a typical policy are claims you have breached confidence or copyright, or even allegations you have acted dishonestly and defrauded or stolen from a client.
Companies can turn to outside consultants for that extra bit of knowledge that in-house staff simply don’t have or simply because it is the easiest and most cost effective way of getting a technical job done. IT consultants can therefore be in high demand, particularly as many companies still do not have their own IT departments or do not have staff which specialise in certain areas such as internet marketing or advanced archived technology. However, if you are in this sector it is always worth considering an IT consultants insurance policy, which can provide invaluable support in the event that something goes wrong.
IT consultants insurance will normally include a level of professional indemnity insurance. This is a type of professional cover taken out by almost any firm which offers its advice on a consultancy basis. In the past it was mainly associated with architects, graphic designers, and accountants – but a growing business awareness of the law means other professionals have turned to it for support.
In short it will typically pay somebody’s legal bills in the event they face a formal challenge, i.e. they are sued. This can happen for all sorts of reasons from a simple mistake on a job to an allegation that a consultant has somehow defamed somebody or breached copyright. The cost of a legal case can soar quickly and depending on the details can run into the hundreds of thousands of pounds or more. Then if the case is lost there may be a compensation order on top of the solicitors bills.
Indemnity cover as part of an IT consultants insurance plan will typically pick up the cost for someone’s legal defence and will even pay the cost of any compensation which is awarded against the policyholder.
This will be subject to certain limits, as no insurance company will pay out towards legal bills and compensation indefinitely. However, the firm can select a level which they believe is appropriate to their business. Larger companies with hundreds of clients may want protection which runs into millions of pounds, while a much smaller firm may want a level of cover which is much smaller and will therefore typically include a smaller premium.
An excess can also be arranged on this type of insurance, with the policyholder picking up an initial bill for legal fees before the insurance cover kicks in properly. This can also bring down the cost of the premium.
As far as the protection itself is concerned an IT consultants insurance policyholder is normally covered in the event they are formally accused of making a mistake, omission, or even committing an act of negligence in their day to day business. Allegations of breach of confidence or copyright are also normally covered, as are claims that an IT consultant has lost important data or documents belonging to a client.
Some businesses tend to operate from one month to the next without keeping much aside, while other perhaps large organisations have considerable cash reserves. But whatever a company’s balance sheet looks like, they may struggle to pay for an expensive legal case if they face a formal action. This is why professional indemnity insurance has become popular with outside consultants including information technology pros. IT contractors insurance is geared to provide specialist cover for those who work in the sector.
This kind of cover is worth considering because a mistake while completing a job for a client can lead to a business losing a considerable amount of money. Erroneous advice or a slip during a high profile installation can both lead to a formal complaint or being sued in certain circumstances.
IT contractors insurance normally includes an element of professional indemnity cover, which will essentially pay for the cost of someone’s legal defence if they ever do face a case. Normally it protects against solicitor’s fees in the event the policyholder is accused of an unintentional mistake in the general conduct of their business.
This normally includes allegations they have made a mistake, error, or simply omitted something which they should have included in advice or an installation. It also covers slightly more complicated legal matters including allegations that the policyholder has accidentally breached someone’s copyright or confidence, or defamed somebody through libel.
It will even cover allegations that you or an employee of yours has acted dishonestly – in the event there is an accusation of fraud or stolen data, for example.
IT contractors insurance typically comes with flexible policy limits, as no insurer will pay out indefinitely towards legal bills. So a firm which has less high profile clients may want a policy limit much smaller than a firm which deals with several multinationals, and the policies are often priced accordingly. The good thing about this type of cover is it will not matter whether or not the claim against you is valid or not – protection will be included in any case and will even cover the cost of compensation which is awarded against you.