Also known as ‘professional liability insurance’, indemnity insurance protects business from claims made by clients, not against physical damage or bodily harm, but as negligence or failure to act by a business resulting in financial cost or legal concerns for the client. Bit of a mouthful to describe, however it is certainly a crucial form of insurance to have in place for any business working on behalf of clients. Businesses that hold professionals that can be liable for ‘negligence or inadequate performance’. If a claim is made against your business, professional indemnity insurance will cover the costs of a solicitor, and compensate any damages to your client, should the worst happen and you ultimately lose the case against you.
If your business is your own, it is essential to ensure you have indemnity insurance in the first place, and to check the insurance status of your business regularly, and here’s why…
Don’t have indemnity insurance?
There are a number of examples and cases to find when it comes to indemnity insurance, however one of the more notable scenarios was in January 2016. Three separate solicitors firms were fined by the Solicitors Disciplinary Tribunal (SDT), for ‘failing to secure or check that indemnity insurance was in place’. In this instance, the firms were each accepting new clients, when in fact the firms should have been closing their doors. In short, new clients were being accepted by the solicitors firms and there was no insurance in place for the £250,000+ held in one firm’s client account.
One solicitors firm in particular, Diamond Solicitors Limited, was seen to not have done this intentionally, however the actions of the firm’s founder’s actions were ‘harmful to the reputation of the profession’ as the public was at risk as a result of her actions. You wouldn’t like to be on the customer side of this situation, so make it imperative to make sure your clients aren’t in this position either.
What if you’re contracted under an umbrella company?
Good news! If you’re working as a contractor underneath an umbrella company, ContractorUK explains that indemnity insurance is covered by the umbrella company in question, as ‘any bona fide umbrella company’ generally operates the same as any other employer. So at least you know you have your back covered in the sense that any wronged clients will be claiming against the umbrella as an employer, and not you as a contractor.
If it’s your business, don’t leave yourself unsure of whether you need indemnity insurance, or the level of cover you need. Compare indemnity insurance quotes online to take the legwork out of it, and give yourself peace of mind when it comes to disgruntled customers making a claim against your business. The last thing you would want is to have to close the business you have worked extremely hard to build, purely under the weight of crippling financial and legal costs. It’s just like any other insurance policy, but arguably one of the most important when it comes to protecting your business.