The end clients of some Business and Management Consultants are becoming more risk aware and demanding that Professional Indemnity (PI) insurance is in place for consultancies that they work with.
Some of the most popular consultancies for small and medium-sized enterprises (SMEs) that we can provide insurance cover for are:
- Strategic Consultancies
- Training Consultancies
- Organisational Consultancies
- Quality Management Consultancies
- Interim Managers
- Marketing Consultancies
- Human Resources Consultancies
What is PI Insurance?
PI insurance protects you if a dissatisfied customer decides to make a negligence claim against you if they’re not happy with your advice, design or service. The types of errors covered include: professional negligence, dishonesty of employees, loss of documents, libel and slander, breach of intellectual property rights and breach of confidentiality.
In addition to the indemnity limit, the insurance usually pays defence costs. The claimant needs to prove that they have suffered a financial loss as a result of your actions, but even if the claim isn’t successful the policy will cover your defence costs. The policy works by covering claims that are made while the policy is actually in force, even if the error causing it happened years ago. So policies should be kept up-to-date, otherwise there’s no protection against claims for work done in the past.
The Tokio Marine HCC – Professional Risks PI policies for Business and Management Consultants can provide primary limits as low as £100,000 or up to £10 million. In order to select the limit most appropriate, think about what the financial loss could be to your customer should you make an error. One of the other considerations here is what limit of indemnity you may be contractually obliged to carry by your clients.
By bringing peace-of-mind to you and your clients, a PI policy for Business and Management Consultants allows you to carry out work with confidence and makes you look more professional to customers.
Ask yourself these questions to determine if you need PI insurance:
- Do I offer advice or a professional service, handle client data or intellectual property?
- Does my professional body/regulator require that members hold PI insurance?
- Do my clients’ contracts stipulate I need a certain level of cover?
Tokio Marine HCC – Professional Risks, Business & Management Consultants PI insurance
Tokio Marine HCC Group is perfectly placed to recognise the areas of cover required to make sure the insured’s balance sheet is protected; such as
- Cover for breach of contractual duty to exercise reasonable skill and care
- Cover for a PR and/or crisis management consultant to avert or mitigate any damage to the insured’s reputation
- Cover for the cost of criminal proceedings, including legal costs and expenses
- Cover for court attendance
- Mitigation of loss cover
- Cover for sub-contractors
- Cover for indemnity to principals
- Mergers & acquisition cover
Business and Management Consultants insurance claims examples
- Insured was engaged to project manage the implementation of a new IT system and appoint IT contractors. It became apparent early on that the insured was negligent in performing this task. Delays occurred and deadlines were missed. The customer became increasingly frustrated and sacked the IT contractors involved. A claim was then made against the insured for the negligent management of the implementation and the cost involved with hiring new IT contractors.
- Insured was engaged to provide the customer with general consultancy to improve the firm’s processes and make them more efficient. The work was carried out over an extended period in order to accommodate the complex day to day activities of the client. After the contact period was over the Insured issued their final invoice. The customer refused to pay the invoice in full as they felt the project was not completed and the results had not been delivered. The contract however had not set out clear objectives and therefore there were ambiguities over what each party felt was the agreed outcome. On receipt of the Insured’s final invoice the client intimated that they would pursue a claim against the Insured for the costs incurred by their business at management level over the period of the contract and that these costs were substantial, furthermore they would issue a counter claim should the Insured pursue them for settlement of the outstanding fees. In order to avoid a significant claim against them for professional negligence and in the absence of a contract that provided a useful basis of defence, Insurers paid what was considered Irrecoverable Fees in order to avoid a far greater and potentially successful counter claim.
This article does not represent personal advice or any recommendation. Please seek advice from your Insurance Broker who will be happy to look at your individual business needs and circumstances.
Tokio Marine HCC is a trading name of HCC International Insurance Company plc, which is a member of the Tokio Marine HCC Group of Companies. HCC International Insurance Company plc is authorised by the Prudential Regulation Authority (PRA) and regulated by the UK Financial Conduct Authority (FCA) and Prudential Regulation Authority. Registered in England and Wales No. 01575839 with registered office at 1 Aldgate, London EC3N 1RE.