If you run a management consultancy business, you may think that nothing will ever go wrong – for example, you will never be sued; an employee will never act dishonestly; or you will never be accused of negligence. However, some things are beyond our control and things can, and do, go wrong. Management consultants professional indemnity insurance is designed to help protect you and your livelihood in circumstances such as this by protecting your business in respect of any legal liability which arises out of its exercise and conduct.
What are its benefits?
There are different types of professional indemnity insurance (PI insurance) and, often, different levels of cover too, which can help protect you and your business against the financial fallout of a claim being made against you (this may include any legal defence costs and help with damages awarded to the third party – up to the policy limits of course).
What to look for when buying cover
As highlighted above, there can be differing levels of cover depending on the PI insurance policy you buy including whether it is trade-specific (eg insurance for management consultants).
Things to look out for when comparing management consultants professional indemnity insurance may include:
- checking how much any excess would be in the event of a claim. Most professional indemnity policies will have an excess if you make a claim;
- the sum insured (ie the amount of cover you have) is of great importance as being under insured means you will have greater financial responsibility should a claim be made against you. Some of your clients may insist that you have a minimum sum insured in order to provide them a service, so do check;
- ensuring that your policy covers all time frames. Often, there may be a delay between an event and the subsequent claim. For example, if you are in the middle of changing insurers, ask your new PI insurance provider if they will accept new claims for prior incidents. This is often known as retroactive period;
- finally, remember when comparing policies that the terms and conditions of the insurance can differ depending on the providers. Therefore, always ensure that you check them to confirm the pertinent points of the insurance.
Having the peace of mind that you have management consultants professional indemnity insurance in place can help you focus on the most important thing – running your business.
Insurance might not be much of a first priority for many fledgling businesses, but the right kind of cover can be vital in a crisis depending on someone’s line of work. The legal pitfalls for firms are numerous these days, and a greater legal awareness means that some people could be more likely to sue if they feel they have been wronged by a business. Management consultants can arguably be particularly at risk because they regularly deal in high profile advice which can make or break a business. Depending on their circumstances, they could face legal action if any advice on training which they issue causes a dispute or is alleged to have not been worthwhile. Management consultant indemnity insurance can act as a protective shield against legal claims, by effectively picking up the cost of defending them.
Mistakes can be costly if the client loses money, and suffers what is known as a financial injury. Many disputes can be sorted out amicably without getting lawyers involved, but occasionally a court case ensues and this often means hiring legal help to defend a case. Unless somebody is a trained solicitor or confident that they would be able to defend themselves effectively, they are going to need professional advice.
This of course can be expensive, particularly for longer and more detailed cases. Management consultant indemnity insurance policy holders can simply claim on their cover in the event they face legal action, meaning the insurance company pays for the legal bills, not them. Even if someone loses the case against them, any compensation which happens to be awarded in favour of the complainant will be covered by the protection.
However, it is important to understand what this kind of insurance will and will not pay for. Normally indemnity cover protects against allegations that someone has acted negligently, made a mistake, or omission in their general business. This is not the be all and end all, as most policies also protect somebody in the event they are accused of unintentionally breaching intellectual property rights, losing or damaging a client’s important data or documents, or even if someone is accused of acting dishonestly, and an employee of the policy holder is facing allegation they have stolen from or defrauded a client.
Management consultant indemnity insurance also comes at different levels, as policies don’t pay out indefinitely but only up to a set limit. This can run into hundreds of thousands or millions of pounds if necessary, and this will depend on the size of the business and the type of clients they deal with.
Insurance for businesses can be an often misunderstood and occasionally confusing topic. Cover comes in all shapes and sizes and some forms of it are essential for some types of business. Some professions even need certain types of insurance in place to fulfil legal requirements. Many types of management consultants may not need certain kinds of insurance to comply with the law, but that does not mean they should discount it entirely. This is because certain kinds of protection like management consultant indemnity insurance can safeguard a business’ financial future should it face and unwanted legal action.
Indemnity insurance can apply to anybody who offers their advice on a professional basis. It normally pays out for incidents including specific claims that you have made a mistake, omission, or act of negligence in your day to day business. This may seem unlikely with the right now preparation and training, but some clients may perceive a mistake where there has been none, or blame a consultant when something goes wrong with their business.
This can result in a legal claim and thankfully management consultant indemnity insurance pays out no matter how valid the claim against you is. It works by paying legal bills up to a set policy limit, essentially meaning that the fees for your legal defence are paid, and the cost of compensation is also covered should it be awarded against you.
The policy limit is important because if somebody breached it during the course of a court case they would essentially be liable for any costs which are racked up after this. This means while it can be tempting to cut corners to save money, it can be sensible to get a limit which is appropriate to the size of a business. Of course, a firm which has a number of international clients and which deals with multimillion pound contracts will need a higher level of protection than a medium sized firm with only a handful of clients.
Management consultant indemnity insurance can come with an excess too – in much the same way as a common or garden car insurance or home insurance policy, allowing someone to name an initial amount in legal costs which they would pick up themselves before the cover kicks in. This, along with the policy limit, can influence the cost of the insurance.
Time and costs are often the most crucial things when it comes to setting up the right insurance policy. Consultancy businesses are often busy already without having to spend longer than they need to to sort out professional insurance. But many professionals including management consultants are aware of the legal risks of any firm which involves delivering external advice, and so recognise that indemnity insurance could be a good move. One way towards getting a policy quickly and cost effectively is through a management consultant indemnity insurance professional, such as a broker.
Brokers not only only deal in car and home insurance, but also in this professional level of cover. Indemnity insurance is designed to pay your legal fees in the event that you face an unexpected legal claim, i.e. you are sued. This can happen because a management consultant’s clients are unhappy with the work of the consultant or believe they have actually lost money because of their advice. An indemnity policy will normally protect somebody or a firm in the event they are accused of making a mistake, error, or act of negligence in their day to day business.
To get insurance like this in place you can contact a management consultant indemnity insurance professional who will normally ask a number of questions about the business and what type of cover you are after. They can often take you through some of the various options available on indemnity protection, and will then go away and get a number of different quotes from various providers.
To give an example, a broker might ask a consultant what type of client they usually deal with and how they agree contracts. If it is for an individual, they may ask about the person’s qualifications. They will also want to know what kind of policy limit you want as indemnity insurance does not pay out indefinitely towards legal fees and compensation awarded against you. This is one of the most important parts as you can end up under insured if you name an amount which is too low, meaning you could end up picking up the wrong end of a legal bill if your cover runs out during a case. Likewise being over insured means you may end up paying for a level of cover which is more than you really need.
A management consultant indemnity insurance professional could also explain some of the basic options, which on some deals can include public liability insurance as an extra, and even retroactive cover, which protects a business against any claims which arrive in future but which date back to something which happened before the insurance was even purchased.
Depending on someone’s line of work, the right cover can be almost as important as the right equipment and the right training. Because more people are legally aware now than they were a 10 or 20 years ago, the legal risks facing consultants in particular can be bigger than many people imagine. A serious mistake which harms a client can lead to a legal case, which will often need specialist advice to defend. This is why management consultant indemnity insurance is now available from a wide variety of providers.
In exchange for a regular premium the policy holder gets a guarantee that the insurance company would pay the legal costs up to an agreed limit if they ever faced a formal challenge. It pays out in the event that the management consultant, be it an individual or business, is accused of an act of negligence, or mistake in the general conduct of their business. Often this can apply if a company feels they have lost money and suffered what is known as a financial injury.
This is one example of when a client may be more minded to sue. However, some of the other examples when this kind of cover might pay out includes claims that a management consultant has breached someone’s confidentiality or copyright, or has perhaps somehow defamed somebody through libel. Unintentional infringement of intellectual property rights is another phrase, which typically refers to the breach of someone’s copyright.
One of the key things of management consultant indemnity insurance is that it pays out in the event you face an accusation of one of the above, and the cover is not conditional on whether or not the claim is valid or whether or not the case against you succeeds. It is merely designed to pay your legal defence and any compensation which might be awarded against you. However, in order for cover to be valid, you must not have done something malicious, i.e. deliberately destroyed someone’s data or documents or set up something wrongly in order to cause them problems.
Management consultant indemnity insurance can be called upon no matter what stage in the courts system the case gets too, so it can protect somebody from the fees run up at an initial hearing, all the way through to the high court, provided they stay within the policy limit. This maximum payout limit will often dictate the cost of the premium, so its important to assess what level is right for your business.
While many consultants, whatever their profession, manage to complete most assignments comfortably and without disputes, the nature of the job means that not everyone is going to be happy. Management consultants are a breed of professional who typically carry a significant amount of responsibility and could be at particular risk if something goes wrong. A high level mistake can lead to a client losing a considerable amount of money, and some could be minded to seek compensation through the court system if they feel the mistake was avoidable. Sometimes a firm will wrongly decide to blame a consultant for something which has gone wrong, and even this kind of claim will have to be defended formally. Management consultant indemnity insurance can protect a business or individual against the threat of legal action by helping to pay some legal costs and even cover compensation.
A management consultant might be hired to pass on specialist techniques to executives in a company or may be taken on to develop a new marketing strategy. If the client felt that the marketing strategy did not work or worse still saw the company take a backward step they could seek to recover their money and any lost profit through a legal challenge. This often means hiring legal help to defend a case and facing the prospect of compensation payments if the defence is unsuccessful.
Management consultant indemnity insurance would pick up the cost not only of the legal defence but also of the compensation if it was awarded against you, subject to set policy limits. Policies often also include an excess, as with any domestic insurance policy, and this can be tailored up or down to suit and influence the premium.
The normal wording of a policy like this means it will pay out in the event you make a mistake, error, omission, or act of negligence in your day to day business. However, it also typically protects against claims you have lost or damaged a client’s important data or documents, allegations you have unintentionally breached confidence or copyright. If you have employees either intermittent or regular, any allegation that they have acted dishonestly can also often be protected against.
A policy like this may also include public liability insurance are either as standard or as an optional extra for an extra fee. You can even take out what is known as retroactive cover, which protects you against allegations which are actually lodged in future but which actually relate to something which happened in the past, before you even bought the insurance.
Run off cover is another interesting potential addition, which can protect you for a period in between insurers for if you decide to wind down a business or retire. Just because a firm or person has stopped trading does not mean that they are immune to legal action dating to something which happened in the past, so run off protection on top of management consultant indemnity insurance can help guard them against this.
Working as an outside consultant brings with it its risks and rewards, and it is important to make sure you have the right cover in place if you specialise in something like management consultancy. With everything going well and smoothly, it can be easy to assume that you will never fall into some of the common pitfalls. If a client feels you have done a job below what they expect, for example, they can demand a refund and even take legal action. This is why management consultant indemnity insurance is popular with some professionals.
This kind of cover basically pays out if you need legal defence due to being sued by a client or relevant other because of a mistake you have made. Typically you can expect a legal action because someone has suffered what is known as a ‘financial injury’.
This may mean a legal action and hiring a professional to help defend your case, unless you are brave or qualified enough to try to defend yourself. Of course you may find the compensation is awarded against you, and management consultant indemnity insurance will even pay for this should it happen.
Typically a policy like this also covers you if you are accused of breaching someone’s confidence. It normally also covers allegations you have unintentionally defamed someone, breached someone’s copyright, or acted negligently. Public liability insurance may also be included depending on the policy and insurer.
You can normally agree an excess with this type of policy just as you would with any other kind of insurance policy. This means perhaps deciding what you could afford to pay out in terms of initial legal fees should you face a case. A cover limit will also apply, and you will need to decide what would be appropriate for your business – larger firms may want protection for millions of pounds worth of legal fees, while smaller freelancers may want thousands or hundreds of thousands.
If you select a limit which is too high, you could be paying for more than you need. Too low, and you could end up being under-insured – leaving you to pick up the difference between the total of a legal bill and the ceiling on your cover.
Management consultant indemnity insurance also comes with some extras, like overrun protection. This is used to cover you for the time between when you move from one insurer to another, or perhaps when you wind down a business or change jobs. Because you have ceased trading or retired does not mean you will be immune to legal claims. Retroactive cover can even guard against things which happened in the past, for which you receive notification of after you have bought an insurance policy.
If a business has a string of happy clients behind them, it can be easy to assume that all will always go well and without complaint. But management consultants carry a significant amount of responsibility and might at times might be expected to deliver top results fast. Companies may hire them to turn things around and stabilise their business. If a client ever feels that a management consultant has done a job below what they expected or paid for, then they could seek legal action. This might seem unlikely, but when it does happen a legal dispute can be costly and stressful, but can be dealt with more smoothly with management consultant indemnity insurance.
Cover products related to legal scenarios might sound complicated and pricey, but what ever the provider and product indemnity cover is essentially quite simple. Typically it is designed to pay your legal bills if you ever face legal action having made a mistake in your general day to day business. In terms of a management consultant this could apply if they were ever accused of giving advice which actually ended up harming a business. In certain circumstances disputes can arise which could then end in a court case and possibly even a compensation order.
With all the training in the world mistakes do happen, an indemnity onsurance would cover you against errors, omissions, or straightforward acts of negligence. A policy of this nature pays out regardless of whether or not you feel what you’re being accused of is valid. This is because legal claims have to be defended no matter what you think of their status, and this often means hiring legal help to defend your corner.
Management consultant indemnity insurance also protects against a very broad range of other eventualities. You can normally expect protection if you’re accused of defaming someone, breaching copyright or confidence agreements, and even if you happen to lose or damage information or documents which belong to a client which you had in your care to complete a job, for example.
All you will have to decide is what level of cover you want as a policy will not pay out indefinitely. Here it is important to avoid being under insured, as too low a level and you could end up paying some are very legal bill yourself even though you have cover.
Management consultant indemnity insurance can also be arranged for people who are looking to retire or wind down their business. An insurer will provide you with an overrun period which protects you even after you have stopped work. This is handy because some claims do not arrive until months after an event has occurred. Something called retroactive cover works in the same way but applies to things which happened in the past, before you took out the cover policy but which do not come to attention until months after.
Business can be enjoyable and unpredictable at the same time, and many people thrive on not knowing what will happen from one date to the next. But sometimes life can throw up some unwanted surprises, and a simple mistake or dispute can get out of hand. Management consultants who deal with a range of clients could be at particular risk as they are offering a professional service which is open to attack if it happens to fail. With all the will and training in the world, not every client is guaranteed to be happy, and if someone feels they have lost money there is a chance they would take legal action. Management consultant indemnity insurance can protect against this unfortunate eventuality, effectively picking up the bill for any legal defence you have to mount.
For example, you might be hired by a company to plan out a new direction for their sales department. You may be asked to shore up marketing strategies and produce detailed plans for the future of the business. Over time the client may feel you have done a poor job and even blame you for low profit and even a loss. Although you may not actually be to blame, a legal claim will still need defending.
Management consultant indemnity insurance will help you with the cost of hiring your legal defence, which could be particularly expensive if the case is very long and complicated. And cases can go on for months or even years, and in the worst case scenario you could find that a court finds against you and awards hefty compensation to the claimant. Again, indemnity insurance would actually pick up the cost of the compensation itself, potentially protecting your business from a bill running into hundreds of thousands or even millions of pounds.
However, you will need to decide the limit for your policy as an insurance company will not pay out for legal assistance and compensation indefinitely. You may want to agree a limit which is appropriate to your needs. So a consultancy firm working with very high-profile clients may want protection for a million pounds worth of legal expense or more. Small companies may want protection for less than this.
Besides mistakes, omissions, and acts of negligence, an indemnity insurance policy will also protect against things like allegations of breaches of confidence or copyright. If you were ever accused of unintentional defamation it would also payout, and you would even be protected if an employee of yours was accused of acting dishonestly. You can even get cover which protects against future claims which may arrive relating to something which happened before you even bought the management consultant indemnity insurance, guarding you against the often slow nature of legal actions.
Although the life of a management consultant can be quite hectic and pressured, most people operating in the business have an eye on their long-term strategy and on how they expect to maintain the firm in future. Whether you are a lone freelance or a specialist company, it can pay to plan ahead. Management consultant indemnity insurance is a form of cover which can protect against unwanted surprises, specifically legal challenges which could result in considerable bills if you do not have the right cover.
Indemnity insurance is a basic policy which many people operating in the sector already have in place. Some people have it not just as an operational necessity, but also because some firms require them to have a policy in place before they begin working with them. In short, this type of insurance will pay out towards legal bills if you are ever accused of making a costly mistake during your normal business. For example, a management consultant might be hired by a company to help implement a new flexible working strategy. If the company feels the programme is ineffective and ultimately loses them money, they may rightly or wrongly seek compensation, particularly if they feel they have suffered what is known as a financial injury.
The normal wording of a policy states that it will cover mistakes, omissions, and acts of negligence. This may sound innocuous in some cases, but simple slip-ups can lead to companies losing money. Defending yourself against a court action can be expensive and time consuming. The cost involved can also add the stress of being sued, so professional liability cover can also be a headache cure.
It will pay for not just the cost of hiring a legal defence, but will also pay any compensation if it is awarded to a client. This can stretch to thousands of pounds or even hundreds of thousands of pounds in some cases, all the way up to millions in more high profile incidents. Therefore it is important to select the right level of management consultant indemnity insurance for your business. Every policy comes with a limit, from a few thousand to millions of pounds, with policies being priced accordingly. Go for something cheaper, and you may end up under insured, go for something inexpensive, and you may end up paying for a level of protection you do not need.
Management consultant indemnity insurance will also normally protect against the likes of allegations of breach of confidence or copyright, particularly relevant if you like to take inspiration from other companies and consultants techniques. It can also guard against actions which result from the loss or damage of a client’s data or documents.
Management consultant indemnity insurance can also be tailored to cover against any allegation which arises in future which backdates to something which happened before your policy was even purchased. This is known as retroactive cover.