What risks are covered by Professional Indemnity Insurance?

Mitigating your Professional Indemnity risk and some top tips for best practice

If you are a self-employed contractor or sole trader who provides professional advice or services, such as bookkeeping and business analysis services, you could find yourself facing legal action from a client if they suffer a financial loss as a result of the services provided by your business. This could be due to your negligence, an omission or error in the services provided, and is exactly where your Professional Indemnity policy would usually come in.

Risks covered by Professional Indemnity Insurance

Cover provided by Professional Indemnity Insurance policies can vary between providers, so always be sure to review the scope of cover, however the following are examples of types of dispute your client could bring against your business, and where your Professional Indemnity Insurance may react:

• Professional negligence
  As a professional, you have a legal responsibility to ensure that your clients don’t suffer a loss as a result of the services provided. Failure to do so could constitute a breach of the duty of care that is owed to your clients.
  
  
• Libel and slander
  If you produce or support a false statement about a third party
  
  
• Loss of documents or data
  If you lose your client’s documents or data
  
  
• Unintentional intellectual property infringements
  If you accidentally reproduce or distribute your client’s IP without permission
  
  
• Unintentional breach of confidentiality
  If you accidentally share private information without permission

The thought of legal action being brought against your business is nothing short of daunting and, unfortunately, Professional Indemnity claims can come about even if you didn’t do anything wrong. Your client only has to allege that you’re at fault in order to bring legal action. 
Professional Indemnity insurance covers all the ‘defence costs’ incurred in representing you in these disputes and there are some simple steps you can take to mitigate not only the likelihood of a claim but make your defence easier should a claim arise. 

Tips for Professional Indemnity best practice

• Know your contractual position
  Have your contracts reviewed by legal professionals. Better yet, consider contractual terms such as limitations of liability, or performance standards. Limitations of liability refers to a limit set around the amount a party has to pay in the event of a claim. A performance standard clause is exactly what it sounds like, a clause that sets out a standard of performance that the contracting party agrees to provide e.g., reasonable skill and care.
  
  
• Ensure your remit is clear
  Ensure that both you and your client are on the same page with what you are delivering. With clear deliverables, debate around whether the agreement has been fulfilled is less likely to occur.
  
  
• Don’t overstretch
  When running your own business, it can be tempting to take on as much work as possible, but it’s beneficial to be aware of your limits. Ensuring that you only operate within your areas of expertise and take on as much work as you can cope with means you provide the best quality service you can whilst limiting the potential for errors.
  
  
• Training and qualifications
  Ensure all employees are keeping up with CPD, training, and qualifications so they are not out of step with clients expectations.
  
  
• Maintain good record keeping
  This involves being able to evidence work done, processes followed, and discussions held with clients. Having all this information organised and on hand will serve, not only as evidence if required, but also as a reminder of the exact services agreed to.
  
  
• Knowing and following established processes 
  Having clear processes to follow when providing your services makes it all the more difficult to make mistakes or forget anything important.
  
  
• Practice good security 
  This relates to physical security as well as technological. This can be anything from ensuring the door closes behind you and you don’t let any unauthorised person onto the premises of your client, to making sure your laptop has the latest anti-virus software.
  
  
• Peer reviews
  Implement peer reviews for your services. Having two pairs of eyes on any one piece of work limits the chance that a mistake has been made. It’s as simple as that.
  
  
• Open communication
  Good and open lines of communication with your client are key. Try and check in with your clients regularly and instigate reviews of your services where possible, that way any gaps or mistakes can be spotted and rectified before they become a problem.
  
  
  

We can lend a helping hand

With cover from as little as £13.50 per month, our Professional Indemnity Insurance offers an extra level of protection, the safest course of action is ensuring best practice and taking steps to avoid a claim in the first place, then having cover so an expert can fight your corner should you need it.