I need to be covered against being sued by any company that I do SEO for. If they potentially lose business from dropping in rankings he says I could be liable. Is this true?
Well worded T&Cs between you and your client, like on Quiet Night Beds, might protect you from action from your client if rankings drop but what about, for example, a blog post on behalf of the client that results in a slander or libel action from a 3rd party. Obviously none of us are aiming to be negligent but as webgeek says you don't have to be negligent in your actions to have negative consequences.
I have just been quoted £1,300 per year for SEO professional indemnity insurance that also protects my limited company and me personally (I think!) from slander & libel - as opposed to regular SEO insurance that excludes this and costs a couple of hundred pounds.