Do I need Professional Indemnity Insurance?

kasperblue

Hello,

I'm looking for some advice on Professional Indemnity Insurance, if anyone can offer some advice.

I'm currently doing some freelance work as a Business Analyst - basically its making charts, creating Excel files, writing VBA code that sort of thing. I have a full time job so i'm just getting some work through the People Per Hour Website earning no more than £500 a month.

I'm slightly concerned that I may need insurance? I do see confidential data sometimes but don't really deal with information or data that would cause a company losses or damage? Not sure if this really makes a difference.

Does anyone suggest I do or dont get some, and if so any ideas how much it is?

Thanks
Gemma

InsideInsurance

As long as your contracts dont require it then it is purely down to you - as a contractor I don't have any option because my contract with my client stipulates I must have it.

As to how much, well you know what you are doing. If you made an error in one of your pieces of analysis and it wasnt spotted for 3 years how much damage could it do to your client if they are making decisions based on the code you wrote?

Good quality PI cover isnt cheap! Given in most cases people do actually want it to cover their asses there is little point buying the rubbish £100 policies that you can drive a bus sideways through all the holes in the cover.

The advice I give to clients could have a massive impact on them if I gave duff advice plus they are mainly multi-national companies and so I max out the PI element of my cover. If what your doing is fairly small ticket stuff for SMEs then you probably wont require as much cover.

rs65

Your status is important. If you trade as a limited company then you have limited exposure.

If you trade as a sole trader you have much more exposure - in theory your personal assets are at risk.

magpiecottage

Do remember that PI cover is works on the basis of claims made, not work done. This means if a complaint comes in then it is the insurer at the time it arrives that meets it, not the insurer when the negligence took place.

So if you work as a sole trader you need cover for fifteen years from when you last did any work - or indefinitely if you are in Scotland or Northern Ireland.

Johnkewin

Yes i agree with magpiecottage Professional Indemnity Insurance covers only basis of the claim made not work done.

InsideInsurance

magpiecottage wrote: »

So if you work as a sole trader you need cover for fifteen years from when you last did any work

15 years? On what grounds do you give that length?

Normally you would say 6 years as this is the England & Wales standard law of limitations for most areas. Technically it is from the date of knowing not the date of the incident so if the error goes unspotted for a couple of years it could be longer.

Most would consider it over cautious to have it for 6 years let alone 15 and most those that I know who have stopped being contractors have only kept their insurance running for 1-3 years afterwards.

rs65 wrote:

Your status is important. If you trade as a limited company then you have limited exposure

As a shareholder in the company you have limited exposure. As a company officer you may find your actions attract a personal liability

rs65

England and Wales have limitations of 6 and 12 years. NI law follows E & W. Scotland has prescription periods of 5 and 20 years.

In theory, any employee can face a claim - see Merrett v Babb.

Normally a contract would specify insurance requirements which can continue for a number of years after work ceases. 1-3 years is low. RICS, for example, has a 6 year run off requirement.

InsideInsurance

I have to say that all of my contracts with my client have simply stated that I must have PI and PL with some saying EL. None have ever specified the level of cover required nor any requirement for these to be maintained post termination of the contract.

Given the OP is getting work off a multi-national freelancer project website and only getting £500 a month in fees in I would strongly imagine that it is for their own piece of mind, and possibly a marketing point, that they are getting any insurance at all rather than a contractual requirement.

Certainly if there is a contractual statement on level or duration then you should look to comply with this - though post termination of contract it would be difficult for the client to substantiate that they have suffered losses due to your breach of contract if you didnt maintain the policy as required