Professional Indemnity Insurance for Management Consultants

If you’re running a Management Consulting business, it’s crucial that you have professional indemnity insurance (PII). Here are just a few of the reasons why:

• Many businesses won’t hire you as an advisor unless you have adequate insurance to protect their business if your advice has a negative impact.
• It is very difficult to pinpoint the outcomes of your advice – if something goes wrong in their business clients may seek to recover losses by any means necessary, whether or not your advice was actually a contributing factor.
• Your valuable reputation is at stake. If a client lodges a negligence claim against your practice, even if it is unfounded, you will need to mount an expensive legal defence could be extremely high.
• If one of your employees makes a mistake, even something as innocent as emailing a document to the wrong person, you could be held personally for their outcome.
• Your personal wealth, not just your business assets, is at risk if you are sued for professional negligence.

Based on detailed market and consumer analysis they conducted for their client, a Management Consulting firm recommended that the company focus their service offering on a particular niche market.

Although this initially proved a successful and profitable strategy, 18 months later a new competitor entered the market and quickly gained a majority share, considerably impacting the company’s turnover. The client claimed that the consultant had failed to warn them of the low barriers to entry in this niche, and that by focusing on this market segment at the expense of their other service offerings they had permanently damaged their business.

The company filed a legal suit against the consulting firm, claiming negligence.

Damages of close $350,000 were awarded against the consulting firm. The firm paid an excess of only $xx on the claim, which covered both the damages and its $85,000 legal costs.