What does public liability insurance for IT Contractors cover?
Public liability insurance generally protects businesses and individuals from claims made by third parties for injuries or property damage caused by their business activities. For IT contractors, this means coverage for any incidents that may occur while performing their duties, whether on-site at a client’s premises or remotely.
Injury to Third Parties
Even though IT contractors primarily deal with technology, there is still a risk of physical injury to third parties. For instance, if a contractor visits a client’s office and someone trips over their equipment or cables, the contractor could be held liable. PL insurance would cover medical expenses and any legal costs associated with such incidents.
Damage to Property
Damage to a client’s property is a significant risk that PL insurance for IT contractors covers. If an IT contractor accidentally damages expensive office equipment, furniture, or other property, the insurance policy would cover the cost of repairs or replacement.
Remote Working Scenarios
Even for remote IT contractors, there are risks. For example, if a contractor sends a defective piece of equipment to a client, causing damage or injury, public liability insurance would cover the resulting claims. Additionally, if an IT contractor makes a client site or office visit and an accident occurs, the insurance would respond to those claims as well.
Why do IT contractors need public liability insurance?
Many clients require IT contractors to have public liability insurance as a condition of their contracts. More often than not the IT contractor takes it for granted that these insurance requirements are justified and pays the cost.
But these ‘industry standard’ requirements are often negotiable and every IT contractor should ask questions if it doesn’t seem right.
Physical risks, even in a digital world
IT contractors don’t just work with software. In certain roles they can have access to valuable equipment or servers holding important data. Causing property damage is a real risk in these scenarios, and a client may hold an IT contractor liable for the financial damage.
Even in remote working scenarios, there are potential risks although very minimal. A site or office visit may be required from time to time. Most of the time absolutely nothing happens but occasionally, as Joe L. has learnt, a small action can lead to very unpleasant consequences.
Case study
Joe L., an IT contractor for a known hardware firm, upon leaving the office left his visitor’s pass on the reception desk without signing out and left the building. A courier who was dropping off some parcels took advantage, gained entry using Joe’s pass and helped himself to several thousand worth of electronic equipment. Joe was held responsible and eventually, his IT contractor insurance had to pay the damages.
The role of recruitment companies in mandating public liability insurance for IT Contractors
Recruitment agencies act as intermediaries between IT contractors and clients. They are often responsible for ensuring that the contractors they place are fully insured to minimise any risk to their clients. However, there are also ulterior motives to have IT contractors buy public liability insurance:
The perception of risk and legal protection
From the recruitment agency's perspective, enforcing public liability insurance for IT contractors is about mitigating any potential risks to themselves. If a contractor’s actions (or inactions) lead to a claim, the agency could also be implicated by the association of facilitating the contractor's placement. Therefore, by ensuring that all contractors have appropriate PL insurance, agencies protect themselves from potential legal and financial repercussions.
In addition, some of these agencies have established relationships with insurance providers and receive financial rewards for every insurance policy sold. This can lead to excessive insurance demands on IT contractors - for example, public liability insurance with a limit of £5,000,000, even if the IT contractors work remotely and have little to no physical interaction with clients.
Another example that is quite common is the requirement of employers’ liability insurance just because the contract contains a substitution clause.
And there is IR35 insurance. Recruitment companies are responsible for determining the IR35 status and under the law they bear the financial risk of getting it wrong. Some recruitment companies started transferring that risk to the contractor by inserting a clause that stipulates that the IT contractor will pay for any investigation costs or additional tax imposed by HMRC.
Is public liability insurance for IT contractors necessary?
While it may seem redundant for IT contractors who work remotely and have minimal physical interaction with clients, public liability insurance remains a valuable safety net.
Public liability insurance for IT contractors is often more than just a contractual requirement. It’s a prudent measure to protect all parties against unforeseen risks. Whether working on-site or remotely, having the right insurance coverage ensures peace of mind and financial security in an unpredictable world.
However, there are also circumstances when it is appropriate for the IT contractor to question the validity of the insurance requirements. After all, it is the IT contractor who has to pay for it.
In summary, if you are not sure, always ask. By asking the right questions is often enough for the client or the recruitment agency to reassess their stance and allow for a change in contract, saving you money along the way.
