When it comes to insurance most covers can be split into three categories:
Category A: you’re legally required to have it – car or employers’ liability insurance for example
Category B: you’re not legally obliged to have it, but you’d be wise to – cyber or directors and officers’ insurance
Category C: nice to have policies such as pet or health and wellbeing insurance
Often people, especially small and medium sized enterprise (SME) owners, focus on Category A covers and pay little mind to the others. Now while no-one wants to spend more on insurance protection than they absolutely have to, not giving due consideration to Category B policies can leave businesses horribly exposed.
At present a common chink in an SME’s insurance armour is the lack of professional indemnity insurance (P.I.). At the time of writing 40% of UK SMEs don’t have P.I. in place. When asked why they typically reply that’s its not relevant to their business’s activities, that they are too small to warrant having it or they blithely reply, ‘What’s the worst that could happen?’.
We recently looked at why all businesses need professional indemnity cover, but the ‘What’s the worst that could happen?’ comment is one that warrants explanation.
While there have been plenty of eye-catching headlines regarding the threat from cyber-attacks – that 60% of affected SMEs close within six months, for example – until recently less has been said about the problems businesses face from professional indemnity claims.
These have been on the rise in recent years and the effects of being found liable can be devastating if you don’t have protecton in place. In some professions such as surveying the market has become so fraught and insurers so fearful that the government has pledged to create its own scheme to ensure they are covered. The situation is grave.
No P.I. Cover: What’s The Worst That Can Happen?
So, what is the worst that can happen and how can P.I. protect you and your business? The following professional indemntity case studies highlight the ways different businesses can find themselves with legal difficulties and the consequences of those problems. As you’ll see, these highlight the range of businesses that are at risk.
Case Study A: The Marketing Agency
A marketing agency is briefed by a client to produce a new lead generation website for a local consultancy business. The agency creates concepts that the client likes and signs off designs that form the basis of the site. As part of the commission, the client makes certain stipulations as to expected traffic levels and the number of leads generated.
Despite the agency’s best efforts traffic levels are lower than desired and online advertising expenditure is higher than the client is comfortable with. The client decides to sue on the basis of contractual liability as, in their eyes, the agency failed to uphold the terms of the contract.
The agency manages to persuade the client to accept an out of court settlement in order to avoid legal costs. The payment exceeds the cost of the work done though, and as the agency didn’t defend its actions in court it suffers reputational damage as it’s seen to have failed to lived up to its promises. Had they had professional indemnity insurance in place they could have contested the case and had any claim covered.
Case Study B: The Builder
A local building firm is asked to construct a garage and lay brick weave on the drive. The property is situated at the base of a slight rise and the lane which gives access to it is prone to localised flooding. When making the initial visit, the owners flag the issue and ask the builder if it will be a problem. The builder advises them that it will be fine; that he will install a drainage channel and any excess water can be carried away.
The works are completed and the owners are very happy. Come the first rainstorm, however, the brick weave is inundated, the drain overwhelmed and water ponds in the garage and around the base of the house, risking the brickwork and the foundations.
The owners take legal action on the grounds of a breach of duty as the advice they were given before laying the brick weave drive was wrong. The builder, fearing a compensation claim and the costs of making good, decides to defend the action and pays for a solicitor. He loses the case; the client is awarded compensation and the builder is ordered to rectify the issue. Without a professional indemnity policy costing a few hundred pounds to protect him, he has to foot a bill for thousands.
Case Study C: The Freelance Copywriter
Chris is a freelance journalist and technical copywriter. He decides to write a piece on a new range of energy efficient oil heaters that have won plaudits for their green credentials. During his researches he finds an article that raises an issue regarding the heaters having thermostat problems which can lead to people being burned. Chris puts this in his piece not knowing that the fault in question was solved soon after the units in question were brought to market.
The manufacturer sues for defamation and without having P.I. in place, Chris is forced to pay hefty compensation out of his own pocket.
It’s clear from the above that not having P.I. cover can prove costly for a wide range of professionals. Traditionally professional indemnity insurance was taken out by the likes of lawyers, accountants and architects, but today occupations as diverse as salon owners and I.T. consultants are seeking professional indemnity insurance quotes. With a professional indemnity insurance policy you can receive cover for:
• The advice you gave was wrong
• The service you gave didn’t live up to their expectations
• Your business has lost their documents/data
• You/someone who works for you has said something online/in the press that is untrue/damages their business’s reputation
Why (Sm)All Businesses Need Professional Indemnity Insurance
It’s a sad fact that the business world is becoming more litigious and that clients are increasingly likely to sue if they feel let down. As digital’s advance continues and external threats such as cyber-attacks rise, so it’s becoming more and more important for business owners to have professional indemnity insurance in place.
As we have said, P.I. cover doesn’t have to be expensive and it can offer you great peace of mind for an affordable premium.
Like Some Professional Indemnity Insurance Help?
If you would like to know more about protecting yourself and your business with P.I. cover, then please contact Coversure Nottingham today. You can call us on 0115 837 0984 or email Coversure Nottingham.