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;
- product liability;
- 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.