Whether you’re a small business or an industry-leading agency, Professional Indemnity (PI) insurance is essential to protecting your organisation.
Too often, we see clients and their customers struggling to settle a dispute – much to the client’s distress. For them, not only could this mean losing business, but also facing potential legal costs and reputational damage.
PI insurance provides the peace of mind that, in the event of a claim, you can put things right without incurring significant loss. Here, we explain what this type of cover is, how it works and why you should invest in it.
What is PI cover?
In its simplest form, PI cover is a type of commercial insurance. It protects your business against allegations that the service you provided was deficient – for example, if the client feels that your work doesn’t meet their expectations and withholds payment.
Needless to say, most if not all agencies are familiar with this situation – whether it’s a case of the deliverables taking too long to produce, not being deemed a high enough quality, or just no longer required. With PI insurance, you’re protected from the financial implications of these fallouts, especially if things escalate.
Why does my agency need it?
Any organisation offering a paid service (be it advisory or physical) is exposed to legal action, especially if a customer believes they’ve suffered some form of financial loss. As far as they’re concerned, you’ve breached contractual obligations and they’re entitled to their money back.
And it doesn’t matter if the client is being unreasonable either. The potential legal costs could make a big hole in your company’s bottom line, or worse…
Having insurance in place allows you to move forward with certainty. You can feel confident knowing that, if something does go wrong, your policy can step in and pay for unexpected and costly actions from disgruntled clients.
What does it pay for?
A PI policy’s core aim is to pay the legal defence expenses resulting from an action. Should the action be lost, good PI insurance also pays for the damages and any legal costs awarded against the business. It’s worth noting, however, that some types of damages (such as punitive damages) aren’t covered, so always check with your broker or provider.
Of course, there are circumstances where you may agree that the work completed doesn’t live up to your typical standards – just as there are occasions where it doesn’t make sense financially to enter into the litigation process. In these cases, insurers can step in and agree to settle the claim with the other party in what’s known as ‘mitigation of loss’. This usually takes place before any legal threats are made.
Mitigation of loss is becoming a standard for most PI policies, but not all. At RiskBox, we deem it a valuable aspect of your cover, and urge our clients to check that it’s included. Likewise, we recommend advising your provider of any customer grumbles the moment they become a concern, as decent insurers can offer strong preventative advice.
What will it protect me from?
The main aspect of PI cover is to protect your business against allegations of negligent advice, errors or omissions in your service. Comprehensive policies, with quality insurers, will include more specific protections related to your industry.
Such cover is necessary for agencies and digital businesses, as they often work under contracts with deliverables, manage IP risks, and publish content for their clients – even if just on social media. Additional protection can include:
Breach of contract
If a client believes the service that was delivered didn’t meet what was stated in the original agreement (such as time, functionality, etc.), they can allege breach of contract. This could result in your agency being sued or, more commonly, it can be used as a reason not to pay.
Again, this type of cover is typically only provided for technology, digital, marketing or communications businesses due to their projects often involving deliverables.
Intellectual property infringement
This provides cover for accidentally infringing another’s intellectual property, whether that’s images, sound or code.
It may be as simple as using an image you don’t have the license to use, or creating a full logo and branding scheme that looks similar to one already in existence.
Should a virus penetrate your IT system, such as through emails or websites, it could sit in the background looking for ways to replicate and cause further harm. If the virus then embeds itself onto attachments sent to your client, and they suffer damage or financial loss as a result, they’re within their rights to take action against your agency.
With this insurance, your agency is protected against the accidental transmission of a computer virus. But remember, policies like this can overlap with some Cyber & Data packages, so if you already have one of those, it’s worth checking if this cover is included.
A large proportion of the agencies we work with publish content for themselves and on behalf of clients. If a client believes this has caused damage to either them or one of their stakeholders, they may pursue legal action.
These can be notoriously difficult and expensive cases, and could arise from something as simple as a junior employee saying the wrong thing on social media.
Whether you’re working on a client’s new products, business rebrand or upcoming marketing campaign, you’re bound to be given access to confidential information. If this is then leaked, your agency could be at the receiving end of legal action.
It could happen when accidentally copying the wrong person into an email, or you could leave a folder in a café – either way, your company may be held accountable.
How can I prepare?
Most agencies only realise their PI cover isn’t appropriate when they’re faced with legal action. Don’t let this be the case with your company. Instead, speak to RiskBox. We’re experts in identifying the right protection for your business and recommending a reputable insurer.
If you’re interested in reviewing your current PI policy, or would like our help in choosing Professional Indemnity insurance, call us today on 0161 533 0411 or email email@example.com.