If your business involves giving advice and using professional skills to aid your clients, then you might need professional liability coverage to protect you should your client claim that you have made a mistake in your advice or been negligent in your work and your client has suffered losses as a result.
Mistakes do happen, however careful you are, and sometimes clients can just look for someone to blame if things go wrong for them. If a client has lost money and thinks they can get it back by blaming someone else (i.e. you) then you may be faced with a claim for compensation through the courts.
Even if you have done nothing wrong, you would have to hire a solicitor to represent you against your client’s claim. Most solicitors charge upwards of £150 plus VAT per hour (far more in London or large city firms) and before you knew it you could have racked up a bill for thousands of pounds defending a claim that ultimately proves groundless.
In these circumstances, a judge could order your client to pay your legal fees as well as their own. However, your client might not have the funds to do so.
If your client won their case, you would probably be ordered to pay their costs and your own, plus the sum ordered to compensate your client.
Professional Indemnity Insurance would protect you against having to pay any of those costs. Other types of claim could be brought that Professional Indemnity Insurance would protect against – including breach of confidentiality; infringement of intellectual property (e.g. breach of copyright) and defamation.
Check online for prices and policy details – make sure that any policy you choose will cover your particular business as many will exclude whole areas of trade.
Remember that Professional Indemnity Insurance only protects you whilst it’s in place – when your policy stops, so does your protection but there is nothing to stop a client pursuing you for compensation even after you have stopped trading and stopped holding your Professional Indemnity Insurance.
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