If you have ever been involved in a paid advisory service or consulting or any other service, you can well feel the presence of various risks which can derail your practice or cause significant financial damage to your pocket. Errors and omissions insurance or professional indemnity insurance is designed to offer protection to companies and individuals from such financial claims and legal defence expenses.
India is known for its services industry. Our economy is one of the unique economies which has captured more GDP from services without the growth of manufacturing as much. Much of this growth has been fuelled by the outsourcing of service processes from the western more developed markets.
If you belong to the service industry and are involved in consulting and advisory services here are 5 reasons for you to consider buying Errors & Omission Insurance:
Risks faced by Services Firms
However secondary (outsourced), consultancy services are not free from risks of contingent liabilities. Whether you are servicing domestic clients and dealing with their local consumers, or international customers and foreign customers, the risk of litigation due to negligence and error of judgment looms overhead.
Your agreement with the client details the scope of your work. However, at times situations change, and the deal may seem ambiguous in some areas. This may lead to decisions which can cost the client or any other party to lose money, image, or privacy.
All of these risks are very real when it comes to consulting and services business. The credit card details of the individual consumers of a foreign client who has outsourced the after-sale management services to you is an excellent example of such a risk.
In case a loss is traced to your business, only indemnity insurance will be able to reduce your legal, financial liability.
Accountability Under Common Law
Some provisions, even though not included in the agreement or written under law, are considered to apply to any activity. Your advisory services and business activity too must abide by these unspoken rules. If ignored, your business can be a target of a lawsuit and financial liability.
The common law usually refers to the customs and judicial history of similar matters. Most public liability claims arise out of common law. For example, a vendor visiting your business premise gets injured. It’ll be your responsibility to ensure his treatment or recovery of financial loss.
Similarly, if your advice caused a loss to a party dealing with your client or while being a customer of your client, you may end up being responsible for the loss.
Indemnity insurance is designed to protect you from a financial setback in such cases. Except, when the mistakes are deliberate or made with the end in mind.
Errors & Omission in Consulting
Consulting is a business full of ambiguity as one party has all the information, and many times the consultant is left to gather required information by him/herself. This may lead to subtle misunderstandings as everything is timebound and at time decisions are made with the available information.
Even the best and most experienced consultants face this issue while dealing with complex issues, and misinformation may lead to a loss to the client. At times, such losses are realised long time after the consulting assignment is over and a sudden litigation may chase the consultant.
A continuous professional indemnity insurance helps take care of defence costs and any legal liability of the consultant.
Legal Defence Costs
Many times, consultants, especially those in medical services, face the claim on the issues where a client feels that they have been negligent in their duties. Such cases, even though false, can put a significant financial pressure on your business. For medical professionals (or for any other consultant) it is important to know what constitutes
medical
negligence.
Indemnity insurance helps you take care of your legal defence costs and provides you aid in arranging a suitable defence or negotiating out of the court.
Unintentional Breach of Copyright or Confidentiality
This risk haunts the advertising and marketing consultants the most, especially when they are working for a client in a highly competitive industry. Privacy breach cases or copyright issues can arise very frequently when you have a multitude of people working on similar subjects.
Although unintentional and happening by mere chance, the legal defence fee and engagement of a lawyer can be costly enough for many small consultants to shut their shops. Better still, have indemnity insurance to save your business from such costs.
Unless you are an insurance consultant, it may become difficult for you understand the terms and conditions of such insurance plans. Worry not, modern insurance advisors have gone online for providing quick resolution to your queries, research, and advisory based on your specific requirements.
Online insurance advisors like SecureNow not only offer you the best advice but also the best policies from multiple insurers so that you can make an informed decision. Furthermore, you can expect a 24x7 helpline and claim process management services as well.
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