Professional indemnity insurance (PII) may help protect your business if a mistake on your part causes a client to sue you for damages.
As a professional businessperson, you may take a lot of pride in providing the best level of service you can to your clients. However, you can’t be 100% sure that your actions will never unintentionally cause your client serious financial problems.
This could be because something you or one of your employees has done while providing services has in fact resulted in financial loss or reputation damage of one form or another for your client.
If your client takes you to court, professional indemnity insurance (PI insurance or PII) typically includes funding for legal bills whether or not the actual claim itself is successful. It would typically also meet the costs of any damages awarded, providing of course they related to an insured risk.
Cover for financial loss
Amongst other things, financial loss may happen as a result of:
- bad advice given by you that led to a loss of income for your client’s business;
- your client having to reduce output or shut down as a result of faulty workmanship on your part (e.g. in computer systems);
- you being unable to deliver within agreed timescales;
- your client having to bring in other professionals in to get the situation back in operation.
Other less tangible causes may include:
- libel or slander;
- breaching confidentiality rules;
- loss of data;
- infringement of copyright.
PII will usually cover you for these actions and many others provided that there was no intention to cause damage or break the law on your part.
For some businesses like accountancy, indemnity insurance for professionals is compulsory. For those other businesses where PII is optional, some clients may still prefer to use the services of professionals who are covered by PII as they may typically regard it as a sign of professionalism and responsibility.
In a competitive market, having a few more plus points on your proposal may do no harm.
Professional indemnity insurance, like any insurance, may be something that you never have to call on. As such, it may seem tempting to do without it, save some money and take a chance. On the other hand if something does happen, it may seem like a very cost effective option indeed.
Management consultants professional indemnity insurance is a form of insurance cover designed specifically for business people and professionals. It looks to offer you financial protection should you be sued for any one of a number of specified reasons.
Why would I be sued?
It doesn’t matter how careful and conscientious you are in the practice of your management consultancy, there is always the possibility that something will go wrong for either you or one of your staff.
It doesn’t take much to suddenly find you’ve an irate client on your hands.
If you think that’s bad, it’ll be as nothing compared to the troubles you may face if your client is sufficiently angry to sue you for damages under any one of a number of headings.
In today’s business world people are perhaps more inclined than ever to attribute blame when things go wrong and to seek compensation – that’s how you could end up in court. Even if your client (or probably ex-client by this stage) fails to win their case, you may still find a huge legal bill landing on your desk.
In a nutshell, that’s why management consultants professional indemnity insurance exists – to typically help meet the financial costs and awards associated with such legal actions.
Where am I vulnerable?
Your legal exposures may vary depending upon the exact nature of your business but typically include you being at risk of being sued due to:
- breaching confidentiality (accidentally);
- libelling or slandering a third party or client;
- delivering a solution that caused consequential damages (product liability);
- accidentally infringing intellectual property rights;
- losing critical client data or documents;
- public liability-related accidents.
This is far from a comprehensive list. If you are sued for any of the above reasons or others, then you may be making some very large payments unless you are covered for an insured-risk through a management consultants professional indemnity insurance policy. (Do note that in relation to the alter bullet point, public liability insurance may not always form part of a professional indemnity insurance policy and may have to be bought as standalone cover, so always check the policy wordings).
Would I be covered against everything?
All insurance policies of any type carry details of the insured risks, exclusions and conditions. It is typically highly advisable to read these carefully.
Some policies of this type may exclude cover under some categories of risk should you be proven to have intentionally committed an offence such as the deliberate publication of client confidential information.
Isn’t it expensive?
Little if any insurance is ever free but the cost must be weighed against the risks you run by continuing your business uninsured or under-insured.
Doing without cover may continue to appear to be the right thing to do – right up until you encounter a problem and are sued.
Management consultants professional indemnity insurance may be surprisingly attractively priced if you think about it in the context of the sums that may be awarded against you by a court or tribunal!
One of your responsibilities as a management consultant is to advise your clients on steps that may allow their business to survive and then, hopefully, to prosper. Yet have you applied your analytical skills to your own business and considered the risks of operating without adequate management consultants insurance?
Knowing the risks
You may be fairly confident that you understand the risks you face. Many business people are well aware of the dangers of being sued by a member of the public following an accident on their premises and as a result of this awareness, take out public liability insurance o protect themselves financially if similar happens again.
That’s fair enough but it may be only part of the story.
Did you know that you could also be sued for defamation of character or libel / slander? If you have the misfortune to accidentally lose a client’s document or data you could also face claims for damages – and that may also apply if an accidental breach of confidence arises as a result.
Sadly, that’s not the end of it.
You may also be exposed to claims coming from an accidental breach of confidentiality or your unintentional infringement of intellectual property risks.
The list could continue.
You may hope that your relationship with your clients would mean that no such thing could happen in a problem situation – but we live in a troublesome and litigious world and you may be wrong.
The cost of being wrong
If you do not have management consultants insurance to provide a degree of financial protection against such circumstances, you could be left facing all the consequential costs and awards yourself.
If you do not have help from insurance, the costs may be quite literally ruinous.
Management consultants insurance
This form of protection typically forms part of what is commonly called PII, PI insurance or professional indemnity insurance. It may help protect your financial interests if you are on the receiving end of such claims – and it also typically includes public liability cover as standard.
As with all insurance, the exact specifics of cover and individual terms and conditions will vary depending upon the provider and policy. It’s worth noting that this type of insurance typically excludes circumstances where you were intentionally culpable – such as your deliberate breaching of client confidentiality.
Winning isn’t everything
It may also be advisable to remember that even if you are sued and win, you can’t presume that costs will be awarded against the other party. You could still end up facing painful legal bills – unless you have PII to pick them up for you.
Management consultants insurance can’t stop these legal actions coming about but it may give you the reassurance of knowing that you have a safety net in place.
The health of many businesses these days may be inexorably linked, in one way or another, to their IT infrastructure. This may represent a huge responsibility for those whose job it is to develop or change this infrastructure, which is why IT consultants insurance may be a sensible step for you.
IT consultants insurance is a form of professional indemnity insurance or PII.
This type of insurance offers protection from the consequences of being sued for damages by your client if they have suffered financial loss as a result of your professional services.
There are a number of potential areas where your professional actions could have adverse financial repercussions.
Typically as an IT consultant, you may be giving advice on what could result in major financial expense on new IT infrastructure or recommending and designing changes to existing systems.
There are the obvious situations, where your client’s business may not be able to function properly as a direct result of something you did (or recommended to have done) to their IT systems. This may result in significant loss of income for your client, not to mention the additional costs for rectifying the situation and then paying again to have the work done properly.
Other possible problems could arise from:
- losing data or documents belonging to your clients;
- accidentally breaching confidentiality;
- incidents of libel or slander;
- being late in delivering agreed milestones;
- accidental infringement of intellectual property rights;
In any of the above circumstances, some of your clients may be happy with a sincere apology from you but others may not – they may seek some form of financial redress. This may take the form of suing you for damages.
In this situation, if you didn’t have any IT contractors insurance you may be facing the prospect of needing to find significant amounts of money for two different types of costs:
- damages awarded against you if your client’s claim is successful;
- the money you personally would have to find to pay the legal costs and fees arising from having to defend yourself against the claim – even if you were ultimately successful.
If you have IT consultants insurance on the other hand, provided you have adequate levels of cover, your insurance may cover some of these costs for you subject to the policy details.
IT consultants insurance may not be a mandatory requirement for you to carry out your role of providing professional services but it may help to keep your business afloat if you end up at the wrong end of a claim for damages.
IT contractors insurance typically isn’t mandatory in many contracting situations (though some clients may demand it) – but it may be a very good idea.
As an IT professional, you are probably rightly proud of your skills, knowledge and expertise.
You deploy these in support of your client’s objectives and receive a fee in return.
Unfortunately, things don’t always run quite as smoothly as that.
Things can and sometimes do go wrong and your relationship with your client or associates can sour very quickly.
Whatever may have been the case in the past, today people are inclined to turn quickly towards claims and legal redress when a problem arises. If you don’t have insurance to help protect you from the financial implications of such situations, then you may find yourself digging deep into your personal or company financial reserves.
IT contractors insurance (professional indemnity insurance)
Professional indemnity insurance (often abbreviated to PII or PI insurance) typically incorporates the provision of technology contractors cover. This may help offer some financial protection against certain risks.
The cover offer of course varies depending upon the policy but typically includes things such as:
- public liability;
- accidental breaches of confidentiality;
- loss of a client’s data or documents;
- slander and libel;
- defamation of character;
- your unintentional infringement of intellectual property rights;
It is worth noting that the above forms of professional indemnity insurance typically differentiate between your accidental transgression and an intentionally criminal act – the latter will typically not be covered.
Some IT contractors have progressed their careers for many years and never encountered any problems of the type outlined above. Let’s hope that you have the same good fortune!
The problem is, getting hit by any of these types of problems, even once, could easily lead to your financial ruin. So, do you want to gamble on your good luck holding forever?
The typical costs of PII may be seen as relatively modest in terms of the risks that you are perhaps taking by doing without it.
Finding out more about IT contractors insurance sooner rather than after it’s too late, might be a good investment of a little of your time.