Professional indemnity insurance – getting the cover right

October 30, 2010 · Filed Under Professional indemnity insurance · Comments Off 

For anyone working on a freelance basis offering advice or providing services to clients, professional indemnity insurance (PII) may provide financial protection against being sued by your client.

Can be mandatory

For some occupations like accountancy or solicitors for example, professional indemnity insurance (PII) is typically mandatory.

For others, while this may not be the case, PII though optional, may be highly advisable.
In fact, you may find that your clients may insist that you have this type of cover.

Even if they don’t, your proposals/CV may look more impressive to them if they can see that you take your responsibilities seriously by having PI insurance cover in place.

Protection offered by PII

Your client probably paid a significant amount of money for your services as a consultant. They may rightly expect to receive a high standard of work in return and in most cases they hopefully do.

If, for whatever reason, this turns out not to be the case and your client’s business suffers losses that could be attributable somehow to errors or negligence on your part, then they may decide that they may be able to recoup some of those losses by suing you.

Amongst other things, this could be as a result of:

  • accidental breach of confidentiality;
  • loss of documents or data;
  • damage caused by label or slander;
  • defamation;
  • dishonesty on your part;
  • unintentional infringement of intellectual property rights.

So if you do find yourself being sued by your client then your PI insurance may help cover any damages awarded and legal costs.

This obviously assumes that the level of protection you have put in place is commensurate with awards typical for the type or work that you do.

If you have been tempted to economise on premiums and buy a lower level of cover, then you may still find yourself having to find substantial amounts of money to make up any shortfall between the award and your insurance limit.

Public liability

Another area of insurance cover that may be relevant to you as a consultant is public liability cover. This can typically provide protection against third parties or members of the general public who sustain injury or whose property is damaged as a result of your actions.

This type of cover may be included with some professional indemnity insurance policies.

The benefits of management consultants’ professional indemnity insurance

October 22, 2010 · Filed Under Management Consultant Professional Indemnity Insurance · Comments Off 

There is, perhaps, a slight danger that management consultants’ professional indemnity insurance is seen as a luxury and nice-but-not-essential accessory to your professional portfolio.

The reality

That logic and train of thought may be fine – right up until you find yourself being sued under any one of several categories including things relating to losses of data or documents, libel and slander, public liability or accidental breach of confidentiality etc.

The problem is that, as a management consultant, you will typically operate in close contact with your client. Through your fees, you will be helping position them for success and taking your rewards accordingly.

While things are going well, everybody may be happy with that situation.

However, if things go wrong, and that can happen very quickly, your clients may expect you to take responsibility for the consequences – and they may demand more than just a sincere apology.

If you don’t have management consultants’ professional indemnity insurance, you may find yourself in some cases facing insurmountable costs that could, potentially, bring your business down.

Keeping cover effective

It’s also worth keeping in mind that your potential liabilities don’t cease the moment your contract with the client does.

Client can, and sometimes do, take action a considerable period of time after a contractual relationship has been formally terminated.

If you have allowed your insurance to lapse, you may find yourself needing to deal personally with any financial implications arising.

A selling aid

Some potential clients may be positively influenced by your ability to show that you have this sort of insurance cover.

Others may, in fact, insist that such cover is in place as a mandatory component of any request for information or a proposal. Being seen to be rushing to put this into place at the last second may not create quite the professional impression you were hoping for – so thinking ahead may be advisable.

Conclusion

Like any insurance, management consultants’ professional indemnity insurance costs money. Yet those costs may typically be seen as being modest in view of the protection and peace of mind provided. Finding out more may be a useful investment of a few minutes of your time.

Why take out management consultants’ insurance?

October 16, 2010 · Filed Under Management Consultant Insurance · Comments Off 

It’s to be hoped that you’re never in a position where you need to call upon management consultants’ insurance.

Recriminations

However, such situations may arise a little more easily than you may think.

Economic conditions are always tough and in today’s world people may not be inclined to ‘forgive, forget and move on’ when things go wrong.

A previously excellent professional relationship can deteriorate within minutes and move quickly into attribution of blame mode. Once that happens, you may be very close to people reaching for the phone to call their legal advisors – and taking the first steps on the road to needing to defend yourself from a legal action.

The costs of all of that, even if you win, may be very substantial.

That’s why it may be worth giving serious consideration to taking out management consultants’ insurance.

Risks covered

Typically a policy may offer you protection against things such as:

  • unintentional infringement of intellectual property rights and entitlements;
  • public liability cover (in the case of some policies this may need to be purchased separately);
  • libel and slander;
  • dishonesty;
  • product liability;
  • the loss of documents or data, etc.

The amount of cover provided would typically depend upon the cover levels you have purchased. Before trying to economise in that area, it may be worth noting just how big some awards against you may be if you’re sued and lose.

Without insurance, you may be trying to meet those costs out of your own financial reserves.

The probabilities

Nobody can tell you how likely you may or may not be to encounter these sorts of problems. Equally, nobody can predict what would happen should you find yourself at the wrong end of a legal action.

What is clear is that the potential costs involved are huge.

So, you may have a choice:

  • continue to ride your luck and simply hope it never happens to you or;
  • take steps to protect yourself and your business through appropriate insurance.

Management consultants’ insurance is often referred to as professional indemnity insurance (PII). Finding out more might be a smart idea.

Your IT consultants’ insurance

October 9, 2010 · Filed Under IT contractors insurance · Comments Off 

IT consultants’ insurance is a form of Professional Indemnity Insurance (PII).

It exists to offer financial protection to IT professionals against claims from their clients that they were somehow negligent when carrying out their work and that this negligence cost their client money.

It’s not just producing bug-free programme code that an IT consultant may have to worry about. There are a number of other different roles and activities within the broad term IT contractor including:

  • management consultancy;
  • business process re-engineering;
  • systems design;
  • project management;
  • web based consultancy and design.

Any of these activities may give rise to claims for negligence based on:

  • loss of documents or data;
  • breach of client confidentiality;
  • dishonesty;
  • product liability;
  • defamation;
  • unintentional infringement of intellectual property rights.

If your clients claim there are errors in your work that have caused them financial loss or that your work has in some other way been substandard or negligent, then they may decide to sue you.

What happens then may vary, depending on whether or not you have professional indemnity insurance protection behind you.

If you do, then you may expect that typically, and up to set limits, any award will be covered by your insurance as well as your legal costs. It may be worth noting that legal fees may be covered whether you lose or win.

If you have no PII, then you could very well be facing financial ruin, as you would be personally responsible to pay the damages and very probably the legal fees.

PII for IT contractors is not a compulsory form of insurance cover in the way it typically is for medical practitioners or legal professionals. However, given the size of potential awards for damages, particularly if you compare these to cost of an annual premium, it may make good financial sense.

Whether you are a consultant offering advice or a hands-on programmer, IT consultants’ insurance may be able to help you handle the implications of being what you are.

Remember too that once the job is done and your contract terminates, you may still be held liable if things go wrong further down the line.

So if, for example, you wish to cancel your IT consultants’ insurance or perhaps change insurance provider, then you may need to ensure that there is specific contingent cover provision for this situation.

Looking for IT contractors’ insurance

October 6, 2010 · Filed Under IT contractors insurance · Comments Off 

Experience shows that problems resulting from failures in Information Technology may be all too common. As an IT contractor, while you obviously may take great pride in the quality of your work, if you don’t have IT contractors’ insurance then dismissing these issues as someone else’s problem may be a bit short sighted.

IT contractors’ insurance is a form of Professional Indemnity Insurance (PII).

PII exists to protect professional working people in many business areas from being sued for damages by their clients.

Why it’s important

There are possibly some businesses still around which don’t use information systems of some sort. However, these may be few and far between.

Many companies have a substantial financial investment in the IT infrastructure that may not just support their business but actually be an integral part of the business process itself.

Being able to deliver to customers and clients is crucial to the success of any business and a failure to achieve that can be a financial disaster. If the company’s IT doesn’t function correctly then one of the first things that may suffer is that ability to deliver to the customer.

Of course if this scenario comes to pass, then understandably the company directors may be looking round for someone to blame and possibly to recoup some of their losses.

If they think that the responsibility for their problems rests squarely on your shoulders then you may find yourself on the wrong end of a damages claim alleging that your error or negligence was the cause.

Even if their assertion is subsequently proved to be unfounded, you may still be facing the prospect of having to pay for the legal fess you incurred defending yourself.

This is where IT professionals’ insurance cover could be invaluable.

Level of cover

It’s important to get this right.

The amounts that may be awarded against you can, in some cases, be staggeringly high. The small savings on premium costs achieved by selecting a less than appropriate PI insurance policy may in some cases pale into insignificance when viewed against any shortfall between an award and the amount that IT PII cover could pay out.

Unlike PII for some other professions, IT contractors’ insurance is not compulsory in many situations. It may, however, help protect you in what is becoming a more and more litigious business environment.