Every week we speak to hundreds of business owners, and understanding the different intricacies and niches of each firm is one of the most fascinating parts of our job.
As a predominately digital business, we naturally deal with a vast number of Tech and Web Design companies. Without fail, the most common question I’m asked is, “Do I Need Professional Indemnity Insurance?”.
Legally, of course, the answer is no.
Still, in reality, without the protection offered by a PI policy, you could be playing the insurance version of Russian roulette, as a single large claim could leave you and/or your business in financial ruin.
A Quick Reminder – What is PI Cover?
Professional Indemnity Insurance provides indemnity against legal liability and defence costs following acts (or allegations) of professional negligence following advice or services provided by your business.
Surely My Terms and Conditions Protect Me?
Yes and No! It is absolutely critical that any Tech or Design business has a robust contractual agreement in place with their client. However, this will not stop a client from pursuing legal action if things go wrong; or, just as importantly, if they BELIEVE that:
- You have breached the agreement in some way
- You agreed to verbal or written additional commitments that have not been met.
- Terms were not fit for purpose and should be set aside.
Whatever the reason, you could still find yourself on the receiving end of a claim if, in the client’s eyes, you have not met your professional obligations and they suffer a financial loss.
T&C’s – The Case For Defence
The good news is that strong terms and conditions do provide an excellent basis with which to form a defence.
However, the question to ask yourself is, what would you do when a Solicitors letter lands on your doormat and/or the client is withholding significant funds for work you have completed on their behalf?
Chances are, if you have no insurance in place, you would engage your own Solicitor to form a defence, but this can prove costly, both financially and in respect of your own time.
Having a specialist Professional Indemnity Insurance policy removes this headache and provides genuine peace of mind that you will have support when you need it most.
What Are The Most Common PI Claims?
The most common area of claim involves some form of contractual dispute or breach. Our partners, Hiscox, reported that in 2012, over 60% of Indemnity claims for Technology firms included some kind of contractual element.
Another widespread claim for Web Designers involves a breach of copyright or misuse of images.
While you might make every effort to ensure that you have the correct licensing in place if you are uploading images for a client or via a third party, you could still be held liable as your role as a “Web Design Expert” dictates that assumed knowledge exists.
You, therefore, owe a heightened duty of care, or in layman’s terms, ignorance is no defence!
Hosting or Payment Portal Failures
Back to those Terms and Conditions again, I’m afraid!
While you will generally have limited your liability for the failure of a hosting platform or payment portal, if you make recommendations in terms of provider or integration platform, you could still be challenged based on this advice if the services fail and the client suffers a financial loss.
Again, these losses can usually be defended, but not without time, effort and associated costs.
If you are receiving any form of introducer payment from hosting firms or payment providers, again, this could be used to pull you into a claim where a client has suffered significant losses and is seeking recompense.
If sites you build link to or obtain personal data, you could be held liable if the site owner suffers a data breach.
Costs and fines in the area can be significant, and it is often a case of shooting first and asking questions later should a data loss occur.
Is Insurance Expensive?
Another common misconception is that the cost of Professional Indemnity Insurance is prohibitive for small businesses.
In reality, prices can start from under £15 a month, which can provide real peace of mind that you can focus on your business with the security that your Insurer will be there to support you in your moment of truth.