As a contractor you will most likely be used to seeing that professional indemnity insurance has been stipulated as a requirement by your client.
Professional indemnity insurance offers protection to your business against allegations of ‘professional negligence’ from your client, but what exactly is professional negligence and how is it defined?
What is professional negligence?
The definition of professional negligence is when a professional, ether a freelancer, contractors or otherwise, fails to perform their responsibilities to the required/expected standards, or if they breach a duty of care. Professional negligence is typically alleged to be the cause for a financial loss for the client, or physical injury or damage to the client or a customer.
This usually results in a claim made against the individual who is considered to have expertise in their field and in the service that they provide. For any claim to be successful there must be evidence that the service provided was below standard and was the cause of any negative consequences.
What are the examples of professional negligence?
Examples of professional negligence are many and some can include but are not limited to:
Incorrect designs and/or measurements that cause a building project to be torn down, redesigned and rebuilt causing significant extra costs to the client.
Other examples include poor business strategy advice by a marketer; failure to advise about available tax relief by a finance professional; breach of confidentiality by anyone with access to confidential information
How do you defend a professional negligence claim?
Claims of professional negligence can arise even if you have performed a service to the best of your abilities. Circumstances that can be beyond your control are typical causes of negligence claims, and even the most careful and experienced professionals can find themselves subject to claim.
Regardless of how or why the claim has been made against you, defending the claim and proving that you had not acted negligently can be expensive in terms of legal costs, which is why you should carry professional indemnity insurance if you are a professional who provides services, advice and/or designs to clients.
Find out more about professional indemnity insurance and how it can protect your business, or click here to start an online quote and see an indicative price within minutes.
How do company directors protect themselves against a negligence claim?
It is increasingly common for claims of negligence to be made against company directors and even those in management positions.
In this instance it is prudent to consider Directors and Officers insurance, which will provide cover for a range of scenarios; from the legal costs and damages where actionable mistakes have been made, through to paying for legal representation in the unfortunate event of a director’s or officer’s arrest.