smallbusiness.co.uk: Helping your business think big

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Professional indemnity insurance could protect your business from financially crippling and often reputation-damaging claims by dissatisfied clients. In this world of frequent deadlines and added pressure, even the most respectable companies can find themselves in dispute with a client over a mistake.

Possible claims that your business could be exposed to:
• Negligence or breach of duty of care
• Intellectual property: unintentionally infringing on others’ copyrights, trademarks, broadcasting rights, any act of passing-off
• Loss of documents/data: damaged, lost or stolen data and documents belonging to your clients
• Dishonesty: liability arising from the theft of your clients’ money by one of your employees

Different professions, different Professional Indemnity
The risks you are most likely to face depend very much on the nature of your business, but you should be aware that some insurers make no distinctions in their policies.

An IT consultant can be left exposed by the service contractsunder which he works. Breach of either specific or implied terms in a contract is a well-known risk in IT.

A marketing consultant on the other hand is considered more exposed to dangers such as unintentional breach of privacy or defamation (accidental libel or slander).

Management consultants are vulnerable to claims of negligence any time their recommendations fail to come up to a client’s expectations.

Professional Indemnity insurance works in a number of ways:
1. It could cover you if you make a mistake in the professional services you have provided and if it leads to a dispute with a client. If the dispute becomes complicated and nasty, your insurer could defend your claim - right through to the High Court, if necessary. Even if you lose, the policy will still cover you for any damages you then become liable for, subject to the level of cover for which your business is insured.

2. The policy may also cover the cost of fixing any mistake on your part, thus avoiding a larger claim being made. Fixing a problem before it becomes an even bigger problem is simple common sense and helps to avoid wasting considerable time and resources on long and drawn-out litigation.

3. You could be protected if you lose or damage any clients’ documents in your care or if one of your employees is involved in the theft of a client’s money.

Other benefits could include:
• Direct access to specialist claims staff and advisors who understand your industry
• Access to specialist legal teams to defend a claim in court
• Avoiding large legal costs your business would otherwise have to pay for
• Protecting your reputation, as well as the bottom line

How much cover do you need?
No two businesses are the same and there is no single amount of cover that suits all. Nobody knows your business and the exposure it faces better than you. Often, your client will set a minimum limit of the indemnity they require. This can depend on the specific nature of the services you’ve been contracted to provide, or they could have a set limit for all their service providers.

For example, many UK Government departments will require their contractors and consultants to have at least £5 million of cover. It’s also worth considering taking out retroactive cover for work that you’ve already completed before the policy commences. By doing this, you will have all bases covered.

For more information visit Hiscox.co.uk

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