What Is Professional Liability Insurance for Consultants?
Consultants, similar to other professions should consider professional liability insurance
to protect themselves from errors and omissions that may occur while working with clients. Consultants work with companies and help them achieve their business goals. During this process the business may become dissatisfied with a consultant’s performance and respond by suing them for negligence in services provided. This includes errors, omissions and mistakes. Without professional liability insurance coverage, the assets of the consulting firm and the consultant themselves can be at risk. This insurance is a small expense to help protect consultants while they provide services to clients.
Why Do Consultants Need Professional Liability Insurance?
Businesses hire consultants to help improve their business operations through targeted guidance. This involves providing expert advice in key areas of the business operation. Therefore, consultants face risks associated with making mistakes or errors in judgement that could cost a business in profits. When profits are lost due to any negligence or perceived negligence businesses often respond with lawsuits.
For example, when a marketing consultant gave advice that damaged a business’s brand reputation, a lawsuit was filed against them. Businesses expect that their marketing consultants increase brand reputation not decrease it. Therefore, marketing consultants face risks associated with unsuccessful growth of a brand’s reputation.
Management consultants face similar risks as marketing consultants. For example, a company looking to grow its operations geographically hired a management consultant to help in doing so. Unfortunately, the management consultant’s strategies proved unsuccessful and the company took a big loss in the area they decided to expand in. As a result, the company filed a lawsuit against the consultant. Management consultants face risks associated with errors, omissions and mistakes in their expertise.
Social media consultants also face risks associated with errors in expertise. For example, a company hired a social media consultant to increase traffic to their social media pages. After months of working with the consultant and no change in the traffic flow. The company filed a claim against the consultant for negligence.
No matter how many years of experience a consultant has under their belt, they can still make mistakes. This means that they face risks at any moment during their work day. The wrong advice can cost clients thousands. For these professionals, it has become essential to gain protection from professional liability insurance.
Risks Consultants Face by Not Having Professional Liability Insurance
Consultants face many day-to-day risks but not having Errors and Omissions insurance adds an additional risk of lawsuits. Not having this insurance also adds the potential to lose your business completely in the event of a lawsuit. Without proper protection from errors, omissions or negligence on the job, consultants face pricey attorney fees, court costs and other defense costs. For example, a consultant provided professional advice to a client regarding their logo change. After the logo was debuted, it proved unsuccessful and was poorly received by customers. The client saw a decrease in profits and they filed a lawsuit against you for the unsuccessful logo change. Costs associated with the lawsuit would have to be paid by you or your business unless you have a professional liability insurance policy.
In addition to defense costs, professional liability protection also covers consultants for services performed previously (up to a certain agreed upon amount of time) and any other employees, temporary staff or contractors that work for them. For example, say a new employee in your consulting firm provides advice that creates a loss for a client. This client files a lawsuit against you. Professional liability insurance will help cover the costs associated.
Professional liability coverage for consultants can give you peace of mind in providing your best possible advice to clients. It provides protection from human errors as well as negligence that happens in every day work scenarios. It also provides protection from any perceived negligence that a client may blow up into a lawsuit.
Professional liability coverage also impacts your own brand’s reputation. Consulting is a business that relies on word of mouth and when clients find out that you have the right protection, they may feel more inclined to promote your business in the future. This protection communicates that you take your errors, omissions and mistakes seriously and have already considered them thoroughly.
Protect Your Consulting Business With Professional Liability Insurance From The Hartford
The Hartford offers professional liability insurance
for consultants that will cover them from mistakes or omissions that could cost them their livelihoods. The Hartford will stand by consultants in the event of a lawsuit by helping cover attorney fees, court costs, administrative costs and settlements or judgment costs.
For example, say a technology consultant provides a new software program to a business to improve their operations. The program causes an error in the system that creates a loss for the business after they have to pay to fix it. The business files a lawsuit against the consultant for negligence. The Hartford’s professional liability insurance will step in and help cover the costs associated for the consultant.
In another example, a financial advisor creates a new budget for a business to help the business achieve growth. After the budget is implemented, the business immediately suffers a loss as customers turn away from their product and look for higher quality alternatives. This budget error that affected the quality of the product, results in a lawsuit against the financial advisor. The Hartford’s professional liability insurance will help cover the costs associated with the lawsuit made against them.