Protect your business against costly claims for compensation

Monday, August 4. 2014
Protect your business against costly claims for compensation

Every business organisation – from sole traders and limited companies to multi-nationals – strives to deliver a consistently excellent service to their customers. But, with the best will in the world, on occasion that service falls short of expectations and results in significant financial loss and, inevitably, demands from the unhappy client for appropriate compensation. That’s when it’s essential, particularly for small companies and those who are self-employed or work on a freelance basis, to have Professional Indemnity (PI) insurance.

Any individual or company that supplies knowledge, skills or advice as part of a professional service should seriously consider taking out PI insurance. Once known as ‘Errors and Omissions’ cover, it protects against claims made by dissatisfied clients due to negligence, breach of intellectual property rights, loss of money or goods, loss of original documents and data and the unintentional disclosure of confidential information. Importantly, PI insurance will also safeguard your business against the usually high legal costs incurred in defending the service or guidance you have given.

While it is not mandatory by law for any business to have PI cover, there are many professions – accountants, solicitors, architects and surveyors – in which it is required as part of regulatory practise. Interestingly, we have noticed a significant rise in the number of major contractors who now expect their sub-contractors, such as electrical engineers and gas and heating system installers, to have PI insurance in place. Premiums are assessed by taking into account the size and nature of your business and what sort of service you offer (for a sole trader a premium can be as low as £100*).

Here’s a hypothetical example from my own industry. A client calls his insurance provider to change the vehicle on his motor policy with immediate effect. All the information relating to the switch is taken down by one of the team, who makes a note to update the details at a later, more convenient, moment. Unfortunately, it then slips his mind. The next day the client’s new car is stolen and, when he discovers that it isn’t covered, he obviously wants redress for the insurer’s mistake. This is precisely the sort of situation covered by PI insurance.

Underwriters offer a whole array of extensions to a standard PI policy, such as Employer’s and Public liability and office contents and business interruption cover. Pinpointing the most attractive option can be confusing: for example, it might be that your office insurance policy already has Employer’s and Public Liability, so you wouldn’t need to buy the same protection twice. This is when the team at Haden Welbeck can be of great assistance. We will help you find the perfect policy for your requirements at the most competitive price – just give us a call!

* This quotation is based on a sole trader (an electrical contractor) with a turnover of £25,000 and a sum insured of £50,000.