Advice and recommendations
Claims that a recommendation caused the client a financial loss.
Business Consultant Professional Indemnity
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Business Consultant Professional Indemnity
Professional indemnity for management and business consultants.
Consulting claims are almost always about a decision the client made on your recommendation. A restructure that did not deliver, a system chosen that did not fit, a forecast a board relied on. There is no damaged property to point at, so the argument turns on the advice and what was actually scoped. Clear engagement letters do more to limit exposure than almost anything else.
What is it?
Business consultants provide strategy, operations, process improvement, change management, systems selection, tender and bid support and interim management across private and government clients. There is no licensing regime for general consulting, but client, panel and government contracts routinely specify a minimum professional indemnity limit before you can be engaged, and panel arrangements can set that limit for years.
What does business consultant professional indemnity cover?
Project delivery
Exposure from overruns, missed milestones and deliverables that did not meet the agreed scope.
Contractual requirements
Meeting the limits and terms specified in client, panel and government contracts.
What affects the cost?
- Fee income and client size
- Sectors advised, especially government and finance
- Largest single engagement value
- Contract limits required
- Claims history
Worth raising on the call
- Advising on financial products or tax can fall outside a general consulting wording.
- Uncapped liability clauses in client contracts are commonly not insurable.
- Government panels usually specify both the limit and the run-off period.
Claims we are commonly asked about
System recommendation that did not fit
A consultant recommends a platform for a mid-sized client, the implementation stalls at go-live and it is abandoned after licence and integration costs are sunk. The claim generally seeks that sunk spend, and how tightly the scope and assumptions were documented decides how much of it sticks.
Model error in a board paper
A formula error in a spreadsheet feeding a business case understates operating costs, and the board approves an investment on numbers that were never achievable. Claims of this kind are usually quantified as the difference between the decision that was made and the one that would have been made on correct figures.
Milestones missed on a panel contract
Deliverables under a government panel engagement run past the agreed dates, the agency withholds payment and engages another firm to finish the work. The liquidated damages or termination clause in the contract is commonly the first thing an insurer looks at.
Worth confirming in the wording
- Worth confirming whether liability you assume in a client contract beyond your ordinary legal liability is contemplated, since assumed and contractual liability is commonly limited or excluded.
- Worth confirming whether advice touching tax, financial products, migration or legal matters sits inside your declared business activities or falls outside the definition.
- Worth confirming whether work performed for overseas clients, or subject to a foreign jurisdiction clause, sits within the territorial and jurisdiction terms of the policy.
Common questions
Do I need professional indemnity as a sole consultant?
There is no licensing requirement for general consulting, so the driver is usually commercial rather than legal. Corporate, government and panel contracts routinely specify a professional indemnity limit before you can be engaged, and some procurement portals will not let you onboard without a certificate of currency. The exposure also does not scale down with practice size, because the client's loss is what is claimed, not your fee.
What limit do clients usually ask for?
It varies with the client and the sector. Requirements commonly sit anywhere from $1 million for small commercial work up to $10 million or more for government panels and large corporates, and some contracts also specify run-off periods and reinstatement terms. Check the actual contract clause rather than matching what a previous client asked for.
What does business consultant professional indemnity cost?
It depends on your profile rather than a set rate. Insurers rate on annual fee income, the sectors you advise, the value of your largest single engagement, the limit required by contract and your claims history. Advising financial services, government or large capital projects generally rates differently to small business operational work.
Does it cover a client who refuses to pay my fee?
Generally no. Professional indemnity responds to claims made against you for loss caused by your professional services, not to your own debt recovery. Where a client counterclaims about your work in response to a fee dispute, the defence of that allegation may fall within the policy, subject to the wording and any excess.
General information only. Cover, limits and exclusions depend on the PDS, TMD, eligibility, underwriting and the policy terms. See professional indemnity insurance for the wider picture.
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