Working in an IT consulting business involves a lot of experience and skill. Your clients rely heavily on your expertise and ability to “get stuff done”. Whether you are in software development or network admin, you are at the centre of a crucial moment in your client’s business. There is no question that your actions will impact your client’s business.
Let’s take a look at a few examples.
As an IT consultant, you are tasked to develop a customer database for a client as part of a crucial eCommerce system. But after implementing the system, you discovered a glitch that kept customers from using the eCommerce engine for five working days. And just before Christmas! Just how much sales were lost during those five long days? Your (upset) client then decides to sue you for the financial loss.
In other instances, while developing a software solution for a manufacturing client, you accidentally exposed the company’s data to hackers. This has caused panic, stress and financial loss. Days later, you find an envelope full of legal documents in your mailbox.
Why downplay these risks?
You may be thinking, “Why should I worry? My solutions will never fail. I have backups and system safeguards.”
First, you have to remember that there is always the likelihood of a client bringing a claim against you. Even if the jury agrees with you and the case is completely baseless (i.e. vexatious claim), your whole business could evaporate just defending yourself in court. Not to mention your reputation…the business community in Australia is small.
Yes, the stakes are high, and there will always be clients who will put you on the spot. Which is why you have to protect your business and the advice you provide your clients.
Protecting your livelihood
As an independent contractor, you need to assess your need for professional indemnity and public liability insurances. This will protect your business if your client decides to file a lawsuit for what you did or did not do.
You need to evaluate your risks and consider a comprehensive insurance coverage because as an independent contractor, you do not have the financial resources of a big corporation to back you up in the event of a lawsuit. Likewise, consider the fact that in Australia, more companies are requiring independent contractors to carry indemnity and liability insurances when working on a project.
Why do I need it?
Assess your risks based on the work that you do, the nature of your client’s business and how well your insurance contract can cover you from lawsuits.
Consider the following realities:
- Tech businesses are riskier
Technologies are continuously evolving, and IT jobs are relatively new. Also, since technologies are nimble and adaptable, it’s difficult to define a clear standard or acceptable client expectations. The industry simply does not have enough legal precedent, and so it is susceptible to risks.
- Dishonest clients
There are cases when clients file a claim simply because they are dissatisfied with the results of your work, even if you think you were able to live up to their expectations. This is simply inevitable in the consulting business.
If you are an IT contractor, having a well-documented business insurance contract is simply a necessity as this may insulate you from disastrous financial losses together with the right insurances as a backstop.