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Professionals can face lawsuits from dissatisfied clients, resulting in losses. To protect against this, clearly outline services in writing, keep records, and purchase professional indemnity insurance. This insurance settles cases out of court and pays for litigation costs and settlements if necessary.
“Occupational indemnity” is a scary phrase in many professional circles. Unfortunately, a professional of any kind will eventually face a lawsuit brought by a dissatisfied customer. The best ways to protect your business and personal assets from indemnity lawsuits are to clearly outline your services to clients in writing, maintain proper records, and purchase professional indemnity insurance.
A professional indemnity case occurs when a service provider negligently acts in a way that causes a loss to a client or other people. Examples of professional negligence might include a surgeon who mistakenly amputates the wrong limb or a mechanic who forgets to tighten the lug nuts on a wheel, resulting in an accident. When these errors occur, the trader’s negligent actions can result in serious losses for his clients. The professional is liable for these losses, so he can be sued by the client in court for damages.
By clearly describing your services in writing and keeping complete records, you can protect yourself from malpractice and indemnification. Any service you agree to perform for a client must be carefully explained to the client and written in the form of a contract signed by both parties and filed for future reference. If other services are required to complete the agreed tasks, these services should be discussed with the client and changed in the written contract. By making sure everything is written and explained orally to your clients, you can minimize the chances of being accused of professional malpractice or misconduct.
Unfortunately, even with the best precautions in place, accidents can happen. When a business professional or employee makes a mistake, the fallout that follows can mean more than just a loss of reputation. It can also include heavy monetary losses as a result of professional indemnity lawsuits. Professional indemnity insurance is designed to protect the professional’s assets in these cases.
People in professions where they may be at risk of malpractice and indemnity lawsuits can purchase professional indemnity insurance policies. In the event of malpractice claims, the company handling the professional indemnity insurance policy often settles the case out of court, thus eliminating the additional costs of litigation and any larger court settlements. In cases where this type of settlement is not possible, the insurance company will pay at least a portion of the litigation costs and any settlement ordered by the court system.
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