With the right policy, you can protect your reputation and financial stability to make sure you can continue providing professional services with confidence.
What is professional negligence?
Professional negligence is when you or your business doesn’t perform its professional duty with the level of skill and care that is expected - particularly if this results in financial or physical harm or damage to a client.
No one wants to anticipate slip-ups but they can happen. Professional indemnity insurance will make sure that the impact on you and your business is as minimal as possible.
Your customers trust your expertise, but if someone drops the ball and they or their business suffer, you could be hearing from their lawyers.
Here are some key elements of professional negligence:
- Duty of Care: You are expected to provide services with a standard of care that is considered reasonable within your industry. Your duty of care to your clients is an obligation. You are expected to act in their best interests.
- Breach of Duty: You can be accused of a breach by an unhappy client who says that you have an error, missed something, provided a substandard performance or been careless.
- Harm or Damages: To establish a claim of professional negligence, the injured party (plaintiff) must demonstrate that they suffered harm or damages as a direct result of the professional's breach of duty. This harm can be financial, physical, emotional, or a combination thereof.
How will professional indemnity insurance protect me against a negligence claim?
Professional indemnity insurance covers the costly legal charges associated with defending a claim, as well as any damages or settlements that you may be ordered to pay.
If your business is ordered to pay a significant amount due to a particularly damaging claim, professional indemnity insurance could be the difference between your business surviving or not.
A professional negligence case can come completely out of the blue, surprising you when you least expect it, and while you are trying to ensure your business thrives.
What's an example of professional negligence?
Picture this: the business you’ve spent years nurturing is finally becoming a real success. The long nights and countless coffees are paying off, and word has spread about your expertise and top quality services.
Your business is doing so well, in fact, that you’re in a position to take on some additional team members. But despite your stringent hiring process, your new team member doesn’t live up to the professional standards and high expectations you’ve set.
When might this happen?
- A graphic designer could use copyrighted images without permission in a client’s marketing.
- A photographer or videographer could lose the photographs or footage they shot at a client’s wedding or special celebration.
- A DJ could fail to show up to a gig, causing inconvenience or financial losses to an individual or business.
- An events planner could disrupt or insufficiently organise an event, causing distress and dissatisfaction to their client.
- A consultant could incorrectly secure a client’s data, resulting in a data breach.
- A web designer could insufficiently test a clients website before it goes live, or not deliver on the agreed brief, resulting in a failed or unsuccessful launch.
- A therapy practice could breach confidentiality, or they could provide advice or guidance that results in harm to a client.
- A personal trainer could push a client too far, causing them to sustain an injury.
- An estate agent could incorrectly describe a property, misleading a buyer.
Consider what professional negligence case could happen in your business. Are you protected against this?
Should the worst happen, and you get landed with an expensive legal claim, professional indemnity insurance will act as a cushion of support around you and your business. It will make sure the business you worked so hard to build doesn’t find itself back at square one.
A real life example of a professional negligence case happened when an architect firm failed to identify structural issues in a building, resulting in significant repair costs. Another example of a professional negligence case was a claim made against an engineering firm for failing to properly design a foundation, causing damage to adjacent properties.
Professional indemnity insurance would have ensured these businesses weren’t solely responsible for the expensive costs associated with the legal battle, and the necessary repairs.
How expensive can a professional negligence claim be?
Professional negligence claims can be particularly damaging for small businesses and freelancers as they may not have the resources to absorb the high costs involved.
The actual costs involved with a professional negligence claim vary depending on the specifics of the claim, but typically, you’ll be expected to cover:
- legal fees
- court costs
- settlement or judgement costs
- and potentially even damages caused to the claimant.
Many professionals strongly believe that their contracts and processes are watertight. But that won’t stop a client pursuing a claim if they feel they have a just cause.
Costs can easily skyrocket just in the legal fees you’ll be required to pay to fend off the accusation. And if the professional negligence caused significant harm or damages to an individual or business, you really want the best legal representation.
Compared to non-professional negligence claims, professional negligence claims typically involve much higher costs. This is because clients and customers have put their trust in your business, and you have a higher duty of care to them.
It might sound daunting - but fear not, professional indemnity insurance has you covered. Should a damaging professional negligence claim come your way, professional indemnity insurance will give you financial security throughout the claim.
Remember, as a professional you’re expected to be knowledgeable when it comes to your trade or profession. Many insurers will insist that you’re suitably qualified, certified and/or experienced. Should a client make a claim against you, your professionalism will come under scrutiny. A wilful or illegal action is never insurable.
