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- Common professional indemnity insurance claims against self-employed professionals
Common professional indemnity insurance claims against self-employed professionals
- 16 May 2023
- Markel Direct
No matter how self-employed professionals make their living, they all need to be fully aware of the potential consequences that a claim against them could have and protect their businesses accordingly with professional indemnity insurance (PI).
Creative media industry
Intellectual property dispute
You’re a graphic designer and you become embroiled in a dispute over intellectual property (IP) rights in regard to a client project. Another company claims that you have infringed their intellectual property and alleges that you have copied their designs. The company sues you for damages for infringing on their IP.
Brand marks and logos being mimicked is quite common as companies seek to emulate brands they are competing with. In graphic design, similarities can occur by accident. PI insurance will respond to cover this type of claim if an alleged copyright breach is unintentional.
You’re a wedding photographer and you miss an appointment due to your own poor preparation and organisation. You are booked for a wedding shoot but rely too heavily on your SatNav to get you to the church ceremony on time. After driving through heavy traffic, you arrive at the wrong destination and miss the church ceremony as a result. Your disappointed client makes a negligence claim against you for the cost of the photoshoot. You claim on your Professional Indemnity policy to cover the costs incurred by the claim.
A client contracts a self-employed small IT company to provide analytical reports based on calculations from complex data.
The IT provider works with a data provider for the work. Due to an error in the data from the provider, the reports are incorrectly calculated which results in the client investing money based on incorrect information. The client claims damages from the IT provider alleging negligence in their work in that they failed to demonstrate reasonable care when checking the data.
Mistakes can happen, no matter how careful you are. It can be difficult to validate all the information supplied by a third party. This is quite a common occurrence across many industry sectors which can be tough to defend. It is a prime example of why PI insurance is so important.
An IT contractor is charged with installing new software onto a clients’ business systems. Whilst uploading the new software a virus is unknowingly installed which circulates through the company’s system rendering the whole system unusable for a number of days. The client seeks to claim back some of the lost revenue from the IT contractor.
This another good example of why PI insurance is so important and represents a classic negligence claim.
Accounting and finance
Breach of contract and alleged negligence
As a self-employed accountant you fail to comply with filing deadlines for a client resulting in HMRC interest and penalties. This is due to your client delaying providing you with the information and data required to complete their accounts.
This is a common claim but is typically of low value and any taxes that need to be paid to HMRC are not recoverable from the accountant. Claims are typically limited to the interest and penalties imposed by HMRC.
A robust case management system can help you to pre-empt any liability by documenting all your client correspondence, including any instances of the client causing delays which result in late filing. This evidence may be required to support your professional indemnity insurance claim.
A self-employed accountant fails to inform their client that their income has exceeded the VAT threshold and they should register for VAT. As a result, the client claims against the accountant for the eventual liability.
To prevent this, close monitoring of your clients’ finances, monthly or quarterly, can help indicate if your client is likely to exceed the VAT threshold in advance. You can then impart the appropriate advice to your client and avoid any potential liabilities and penalties.
Counselling and wellbeing
Breach of confidentiality
Breach of confidentiality is an occupational hazard for those in the health and wellbeing sector. People might share things with a counsellor that they don’t feel comfortable sharing with anyone else, so it’s vital that this information is kept private.
If a counsellor breaks this trust and reveals confidential information spoken during a session, this could constitute a breach of their duty of care. In instances where the breach is unintentional, professional indemnity insurance can cover the legal costs in defending the claim as well as any compensation due to your client.
There may be cases in which it is necessary to breach this confidentiality, but these are rare. They’re covered by the British Association of Counsellors and Psychotherapy’s Ethical Framework, which is worth keeping to hand for reference whenever you are unsure about an aspect of your role.
Alleged negligent advice
Talking about sensitive issues with clients is going to lead to difficult discussions. There may be occasions when a client interprets advice in a way you hadn’t intended, or the client claims you said something you didn’t.
Good recordkeeping will help support your case if a client alleges that your advice was negligent and makes a damages claim against you. If you have a dated record of what you said, you’ll be able to defend yourself against claims of negligent advice.
Your diligence and duty of care is key to ensuring you and your clients are protected. You can be on the receiving end of an insurance claim for events that are out of your control or for simple misinterpretation and potentially unclear communication.
Business insurance can help to protect your finances and your reputation.
Contact Markel Direct today for a quote for your professional indemnity insurance at www.markeluk.com
10% discount* for IPSE members
IPSE members enjoy a 10% discount* on contractor insurance from Markel Direct, including professional indemnity, public liability, employers’ liability and more.
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*Discount terms and conditions
The 10% discount will be applied to the net policy premium before insurance premium tax is applied. All quotations provided will be subject to meeting underwriting and claims criteria acceptance. All cover will be subject to full policy terms and conditions which are available upon request.
The Association of Independent Professionals and the Self Employed Limited (IPSE) are an Introducer Appointed Representative of Markel International Insurance Company Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.
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