If you’re just starting out as an independent Project Person, there are three insurances that you need to have in place before you start work. These insurances are there to both protect you – professional indemnity and public liability, and help make you compliant – Workers Compensation. They can be a little confusing, so see below for the Project People Business Insurance 101 for Professional Indemnity Insurance.
Professional Indemnity Insurance – this is probably the most important and unfortunately the most expensive.
What is it?
Professional indemnity insurance is designed to protect Project People when your client says that your work caused them to lose money.
An example could be that the go-live of your client project causes their partner system to crash costing $2m. Your client decides that everyone on the project team is at fault and makes claims against the project team to recover losses .
For Project People, $5m or $10m Professional Indemnity cover is the most common. More often than not, your client will specify the level of cover required and will need to see evidence before you start work. For example NSW State Government requires most Project people to hold $10m of Professional Indemnity Insurance. The Certificate of Currency document provides evidence of your insurance.
What does it cover?
Most professional indemnity policies will cover both genuine and vexatious (will explain further) claims against Project People.
Health Warning – Vexatious claims
For Project People, vexatious claims is the least understood and I would argue the major reason for having Professional Indemnity cover.
Vexatious claims are where your client takes legal action against you regardless of its merits, solely to harass or subdue. Your policy will normally provide the legal support to defend and challenge. The cost of defending yourself from vexatious claims can be thousands of dollars and these claims often never reach the courts.
Claims
If your client makes a claim against you, you need to do the following:
- Do not admit liability. Just listen and do not respond.
- Contact your insurer. Let them take control – this is what they do.
- Do not engage lawyer until your insurer has approved…they may not reimburse you.
Public Liability Insurance
Public Liability Insurance is designed to protect Project People against claims of personal injury or property damage that a third party suffers as a result of your work activities. If someone is injured or their property is damaged while you’re providing a service, they may take legal action against you to recover their losses.
Cover includes:
- incidents that occur in your workplace
- incidents at other locations