Management consulting firms face the possibility of claims due to improper documentation, missed deadlines, loss of data or negligent handling of data, and that’s just for starters. Lots of things can go wrong over the course of an engagement. Whether your office actually makes an error in judgment, or things unfortunately go awry due to events you have no control over, you’re at risk of a lawsuit if your client is dissatisfied with your work.
A general liability policy won’t cover these types of concerns. You need what is known as Omissions insurance for managers. The policy will cover you for any errors or omissions within the scope of your work, and is essential for anyone that can be charged with claims of negligence or misrepresentation.
Most companies now opting for professional liability coverage
Having general liability insurance can be important for your business development, and many companies now require both professional liability and general liability coverage in their management consulting contracts. This helps to reduce their own risk by ensuring that any service provider working on their premises will be covered.
Omissions, or professional liability coverage, will pay for your legal defense and any financial compensation for your client in the event of a claim, but it won’t pay you for the time or money you may have to spend to fix the problem and make things right.
Also, errors and omissions insurance won’t protect you if you’re sued for issues not covered by your policy, for example, a client accusing you of stealing his or her customers. For situations such as this, you may be better off creating a contract that outlines procedures for resolving conflicts outside the scope of your policy and that clearly states your rights and those of your client’s.
The likelihood of getting sued often has less to do with the quality of your work and more with the expectations of the client. If your client relationship goes off the rails for any reason you could very well be accused of negligence even if you didn’t make a mistake. There are always factors beyond your control that can affect the outcome of your management or consulting engagement, and Omissions insurance for managers is how to ensure that you won’t wind up personally responsible.