Professional indemnity insurance to protect your business
Whatever the nature of your business, you have probably worked hard to get to where you are today. Yet did you know that all that hard work could typically be obliterated by just a moment’s bad luck or human error? Welcome to the domain of professional indemnity insurance (PII)!
A moment’s misfortune
It’s typically a basic principle of legal action that a lack of intention does not in itself remove liability.
What that means is that however much you may have tried to avoid it happening, if you cause damage to a client through accident or professional negligence then you may be vulnerable to having damages awarded against you.
In some cases this could all revolve around an error happening in just a second or two. Accidentally losing that highly confidential client data or sending very commercially sensitive information to the wrong company, are just some of the things that could land you in very hot water.
Of course, the problem may be more systematic. Perhaps you’ve been unlucky and find you are unable to meet your commitments due to circumstances beyond your control. The problem is that your client may not see it that way and hold you to be in breach of contract due to professional negligence.
Whatever the cause, if your client launches a legal action for damages against you then you’ll typically start seeing some major costs mounting up very quickly.
Professional indemnity insurance
This form of protection typically offers help in two respects:
- legal and related costs (you may incur these even if the action is subsequently dismissed or you win);
- covering subsequent awards against you.
As with any form of insurance, these policies have their own specific conditions and terms. The exact circumstances of cover and the amounts involved will typically vary amongst providers and it may be a sensible idea to peruse these closely before making any final purchasing decisions.
Note that although your intentions may or may not be a factor in a court finding against you, they may well have an effect on your insurance. Some types of cover are only available if the actions that lead to the claim were categorised as accidental – typically all professional indemnity insurance policies may not cover criminal actions or malicious and intentional damage caused to a client.
Finding management consultants professional indemnity insurance
It has to be acknowledged that management consultants professional indemnity insurance isn’t a description that trips lightly off the tongue! Yet the name is far more complicated that the reality.
The risks of being sued for professional activities
It would be nice to think that we can engage in our professional activities without the need to worry about the threat of legal action but sadly that may be a risky approach.
The reality is that as a management consultant, you work closely with clients and provide them with your advice and guidance to help them in their decision-making and business transformation.
If everything goes well, you typically will look forward to receiving your fees and hopefully, your client’s sincere appreciation for your services.
If things go wrong though, in addition to forgetting the praise, you may also need to anticipate legal action for damages of the generic professional negligence type.
Management consultants professional indemnity insurance may help you cover the potential costs of that possibility.
Risks covered
Typically, this form of protection exists to help with the financial costs you may face from legal actions and court awards arising from accidental or professional negligence. It may be important to note that typically this would not cover instances where you or members of your staff were guilty of intentional acts.
These types of policies may be able to offer you cover for things such as the loss of confidential client documents or data, slander, accidental contraventions of intellectual property rights, late delivery claims, libel and unintentional breaches of contract.
If this sounds to be something akin to overkill, then it might be prudent to remember that courts do not necessarily decide on damages based upon intention – they are more likely to be influenced by the losses sustained by your client. In other words, even if the incident was entirely accidental, you may still find yourself facing a huge compensation bill.
Insurance to help you sleep easy at night
If you’re engaging in professional activities then the cost associated with management consultants professional indemnity insurance may be a small price to pay for having that financial support in place.
Management consultants insurance – keeping clients happy
If you are a management consultant then somewhere near the very top of your critical success factors will be the need to inspire client confidence. How could management consultants insurance help you achieve that?
Client confidence – an intangible thing
It’s not easy to precisely define client confidence. If you have a contract with a client and some successful history of working together then hopefully that’s an indication that the client has confidence in you.
Yet at the outset during tenders and proposals, particularly if you have no previous record of working together, the client may be looking at a whole range of indicators trying to assess whether you’re someone that they wish to do business with.
Yes, your price and skills will be important factors but your client typically will also be looking for indications of your professionalism and maturity as a provider of service.
Management consultants insurance is one indication that you have thought seriously about the nature of the business you’re engaged in.
Client perceptions of risk
Clients today are typically looking for partnership and shared risk activities.
The days when you as a service provider could get it badly wrong and walk away carefree are now almost gone.
Clients know only too well how much it’ll hurt them if you are guilty of what they may typically call professional negligence. Both they and you no doubt sincerely hope no such thing will ever happen – but they may well be asking themselves the question what if?
They may well want to see that in such, hopefully unlikely circumstances, they may be able to recover some of their costs and damages through being able to sue you for professional negligence.
So, they may insist upon working with management consultants that demonstrate maturity and professionalism through having a visible and secure form of management consultants insurance (part of professional indemnity insurance) in place.
It may be a fairly safe bet that they will see the absence of such cover as a sign of a cavalier approach to business engagement rather than a sign of your confidence that nothing can go wrong!
Fault – a secondary consideration
In this context, the concept of blame and fault is secondary. If things go wrong in your activities on behalf of your client then it is their perception that counts because that will be the thing that decides whether or not legal action should follow.
If that does happen, you may find yourself on the painful end of some serious legal representation costs even if their action is subsequently unsuccessful.
If the client’s action is successful, then the awards may be staggeringly high and typically you’ll have to find the money yourself unless you have management consultants insurance to help.
Business risks and IT Consultants insurance
For IT consultants, mistakes may prove to be very expensive. IT consultants insurance typically exists to help protect you against such costs if you’re unlucky enough to incur them.
Why do IT consultants need insurance?
If you accidentally create a problem for a client or even if they just believe you have created a problem for them, then you may hope that a rational discussion will be all that’s required to resolve the issue.
If that works then fine – but what if it doesn’t?
Business today typically can’t afford mistakes. Errors cost money and like it or not, we live in a business culture where increasingly the philosophy is that someone must pay.
If your services result in serious damage to your client, then they may take you to court seeking financial restitution – and that’s unlikely to be for trivial sums.
If you don’t have IT consultants insurance then typically you’ll need to find these sums yourself.
If this sounds implausible:
- in 2008 British Gas demanded compensation from consultancy Accenture of around £182million for a flawed IT system.*
I’m not a big company!
Perhaps not, but it only takes one mistake by one person to sometimes cause potentially very serious and expensive consequences.
IT consultants insurance is part of what’s commonly termed professional indemnity insurance or PII for short. It can offer protection against various professional risks that could result in legal action against you.
The exact nature of the cover provided varies depending upon the provider of your insurance and the product you select. Typically you may find protection against things such as:
- accidentally losing key information of your clients;
- accidental contravention of confidentiality and non-disclosure agreements;
- accusations of slander or libel;
- infringing (unintentionally) someone’s intellectual property rights.
It’s perhaps worth contemplating that a court may not take much notice of the size of your company when making awards – they may be much more focused on the damage sustained by your client.
That’s why the awards may be large and certainly big enough to cause you serious financial pain.
Even if you do not lose such a case, you can’t guarantee being awarded costs and you may have run up significant legal bills in making a case for your own defence.
It won’t happen to me!
It’s certainly to be hoped that you do avoid being sued but is that hope something you’re willing to gamble your professional and possibly personal financial future on?
Of course, having IT consultants insurance can’t stop one of your clients suing you. It may mean though that you can rest a little more easily knowing that if the worst happens, you have financial support to fall back upon.
*Source: Contractor UK – http://www.contractoruk.com/news/003785.html
IT contractors insurance – reducing your risks
Yes, IT contractors insurance costs money! There’s a fair chance then that you’re wondering if it’s worth the cost.
Of course, ultimately only you can make that decision. While doing so though, it may be advisable to think just as carefully about the risks of doing without it as you will about the cost of the premium.
Modern professional life – not a laughing matter
One of the most commonly heard words today in business and the media is accountability.
If you’re charging a fee for your professional services, your client and those around you will expect exemplary service. If they don’t get it or something just simply goes wrong, then they may hold you accountable and look to you for professional compensation.
Those scenarios may be seriously expensive, perhaps ruinously so. That’s why IT contractors insurance exists.
The nature of professional risk
So what exactly are your risks?
That will clearly depend upon the specific nature of your business and activities but you may find yourself on the receiving end of claims for compensation due to things such as:
- professional negligence resulting in loss of a client’s data or documents;
- accidental infringement of intellectual property rights;
- implementation of solutions that are not fit for purpose and through which your client suffers material loss;
- late delivery on target dates;
- libel;
- slander;
- and so on.
IT contracting and insurance
IT contractors insurance is part of a generic insurance product range called PII (professional indemnity insurance).
It means that in the event you’re facing legal action for the above reasons, plus others, then you have the security of knowing that insurance is in place to help you survive. It may be worth also keeping in mind that even if the claim against you fails, you may still incur significant legal and other expenses in defending yourself.
In fact, today some employers are insisting on seeing that it exists before they’ll award an IT contract.
PII and honesty
Typically, PII exists to protect you against honest mistakes or circumstances beyond your control.
It typically won’t offer you financial protection if you’re found to be guilty of intentional malpractice or criminal intent.
The facts of life
If you are unfortunate enough to suffer a successful professional claim against you, the sums involved may in the worst case destroy your business and seriously affect your professional life.
Seen against this backdrop, the cost of IT contractors insurance may not seem so expensive at all.
Protecting your business with professional indemnity insurance
Professional indemnity insurance (PII) may help protect your business if a mistake on your part causes a client to sue you for damages.
How?
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;
- defamation;
- 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.
Not mandatory
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.
Why bother?
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.
What is management consultants professional indemnity insurance?
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!
Management consultants insurance – the realities
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.
IT consultants insurance and peace of mind
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;
- etc.
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.
Thinking about IT contractors insurance
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.
Professional risks
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;
- etc.
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.
Probabilities
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.