What Risks May a Professional Indemnity Policy Cover?
Business owners who provide specialist advice are particularly susceptible to a claim from an unsatisfied customer. Whether you run a top city accountant firm or a local hairdresser, if the professional advice that you have given has unintended consequences for your client, you could be held liable.
Depending on your circumstances, the type of risks you are exposed to will vary, but any business that provides specialist advice or services to their client should consider their Professional Indemnity risk, for example:
- A web designer uses unlicensed images on a client’s website which results in the client being sued by the image owners. The web designer may be liable to cover their client’s defence costs and compensation payout to the image owners.
- A bookkeeper incorrectly advises a client that an expense is tax deductible. When the ATO investigates the matter, they fine the tax payer. The tax accountant may be held liable for this mistake and the ensuing costs.
- An IT Consultant designs a software package for a company which doesn’t work correctly, resulting in loss of business and additional costs incurred by the company. The consultant may be held liable to for damages to his client.
As a business owner, the continuing success of your business is dependant upon your ability to manage, mitigate and transfer risks. It is possible to reduce the risk that you are exposed to by evaluating and taking steps to minimise them, however risk cannot be totally eliminated. It is therefore imperative to back up your prevention strategies with a comprehensive insurance policy that can fully protect your business, employees and the general public.