Professional indemnity insurance – getting the cover right
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;
- 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.
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.