Sole Trader Professional Indemnity Insurance

[freelancesam]

Hi,

I've been a web designer for a while and I'm in the process of setting up a small agency as a sole-trader. I've just been approached and accepted to do a small (5 day) piece of work by a large company but their standard supplier terms states the following:

During the term of the Contract the Supplier shall maintain in force, with a reputable insurance company, professional indemnity insurance, product liability insurance and public liability insurance to cover the liabilities that may arise under or in connection with the Contract to a minimum amount of cover equivalent to £10,000,000 (ten million pounds) for each and every incident, and shall, on the Customer's request, produce both the insurance certificate giving details of cover and the receipt for the current year's premium in respect of each insurance.

After looking at quotes for £10m indemnity insurance, the cheapest i've found is around £600 per year which seems a bit excessive for the position I'm in and the work I'll be doing. There's another for £10 per month which covers £5m which is a lot more affordable.

What should I do? Is there any way to get cover for one off projects? Does anybody have any recommendations for good and affordable indemnity insurance for sole-trader web designers?

Any help would be great, I'm new to this!

 

[smallclaimsassistance]

£600 p/a for 10m PII is a steal!

Dean

 

[Frank the Insurance guy]

For a £10m limit £600 is good deal.

As you have found, there is a big difference between a £5m and £10m limit - are you in a position to negotiate the contract terms?

One thing to be aware of is "professional indemnity insurance, product liability insurance and public liability insurance...... to a minimim amount of cover equivalent to £10,000,000 (ten million pounds) for each and every incident"

1. For Professional indemnity and Public Liability - cover can usually be arranged on an each and every incident basis (Also called "Any One Claim") - I suggest you check your quotation is on this basis, and not an Aggregate limit.

2. In respect to Products Liability, you will find your quote is "In the aggregate" which is pretty standard. The difference here is that under "Each and Every Incident" you have cover for any number of claims, up to £10m each one, however under "in the aggregate" you only have a limit of £10m for all claims during the year. You will therefore be technically in breach of the contract requirement, unless you get your client to amend the wording - I would suggest sending them something like the following "We can confirm compliance with the insurance requirements of the contract with the following exception - Products Liability Limit is in the aggregate for all claims during the policy period (as is the norm for the UK Insurance industry)."

As a web designer, the chance of any Products Liability claim is virtually nil, as this relates to physical loss or damage caused by a product you provide or sell - so it shouldn't be an issue for your client.

 

[WaveJumper]

Standard terms for most large companies

 

[Frank the Insurance guy]

Standard terms for most large companies

Not the Each and every incident for Products Liability.

 

[Bob Morgan]

If you are being hired on a Form of Contract written by your client, you may well need to disclose its terms to the Insurer.

 

[freelancesam]

Thanks for the responses.

It seems to be a standard policy they send out, meaning that they're treating me like every other huge contractor they deal with on 7-8 figure contracts. If I were to meet that level of insurance, it would cost a lot more than the job is worth.

I'm so confused

 

[Financial-Modeller]

It shouldn't cause confusion. You have four options:

1. buy the insurance, which will cover you for other work for a year, sign the contract and do the work
2. buy the insurance, and get the client to agree to a higher price - pass on some or all of the cost of the insurance cover which is effectively in their favour and at their request - before signing the contract and do the work
3. don't buy the insurance and risk the client withholding payment until they have seen the certificate of insurance
4. decline the work on current terms

Remember that having insurance cover will enable you to bid for more work on a more professional basis as you move from a one-man-band to an established agency.

 

[Frank the Insurance guy]

If I were to meet that level of insurance, it would cost a lot more than the job is worth.

There is your solution - don't do it!

 

[Darren_Ssc]

This may not go down well, but...

You suggest you've been offered a week's work for about £600 and the standard terms of business are a bit restrictive.

First, you need to find better paying work but...
Second, in the, meantime you need to get what you can and not stress too much about the details. What is the likelihood this work will result in a claim for multi-millions? Virtually zero, I would say. In the unlikely event this happens, you are not worth suing anyway.

Did you read diligently the terms of Facebook, Microsoft, Apple, etc when you signed up with them? Don't say yes because these businesses would never exist if people did.

Don't agree, then @Frank the Insurance guy has the perfect answer.

 

[Financial-Modeller]

Thanks for the responses.

It seems to be a standard policy they send out, meaning that they're treating me like every other huge contractor they deal with on 7-8 figure contracts. If I were to meet that level of insurance, it would cost a lot more than the job is worth.

I'm so confused

I just read this again.

So in the current climate of uncertainty, you have been invited to do some work for a new client, whom you know is used to paying large sums for others to do similar work, and could perhaps lead to more work from this client, or other similar clients when they learn that you have worked for this one.

Your insurance cost for the week will be £12

You think its not worth doing???

 

[Mr D]

I just read this again.

So in the current climate of uncertainty, you have been invited to do some work for a new client, whom you know is used to paying large sums for others to do similar work, and could perhaps lead to more work from this client, or other similar clients when they learn that you have worked for this one.

Your insurance cost for the week will be £12

You think its not worth doing???

There are always some who manage to cheat themselves out of good deals.
Not be cheated by others, cheating themselves. Throw it away, refuse it - simply because of a minor cost that benefits them.

 

[Darren_Ssc]

There are always some who manage to cheat themselves out of good deals.
Not be cheated by others, cheating themselves. Throw it away, refuse it - simply because of a minor cost that benefits them.

It isn't a minor cost though. Where does it say he'll get more work?

 

[Mr D]

It isn't a minor cost though. Where does it say he'll get more work?

Oh I am sorry, I had expected people would read the thread. My mistake.
Getting more work? No, may not get more work. This job may be it for the decade. No more work available.
However presuming the OP is capable of more work and there is demand then they will get more work at some point.

And who benefits from the insurance? The OP.

However if they do not want to spend the money they can refuse the work. As I said people can cheat themselves out of a deal.

 

[Darren_Ssc]

Oh I am sorry, I had expected people would read the thread. My mistake.
Getting more work? No, may not get more work. This job may be it for the decade. No more work available.
However presuming the OP is capable of more work and there is demand then they will get more work at some point.

And who benefits from the insurance? The OP.

However if they do not want to spend the money they can refuse the work. As I said people can cheat themselves out of a deal.

You missed the bit where he said the cost of insurance would be more than the gig was worth and somehow imagined he'd been promised lots of similar work? You also assume he has £600 spare.

What he should do is just get standard liability for 1 million, do the gig and hope it leads to more work. If it does, he can then point out the restrictive clause or, if this future works makes it viable, stump up for the full cover.

Apologies for the real world solution, I know it doesn't fit the fantasy world some members seem to live in but there you go.

 

[Mr D]

You missed the bit where he said the cost of insurance would be more than the gig was worth and somehow imagined he'd been promised lots of similar work? You also assume he has £600 spare.

What he should do is just get standard liability for 1 million, do the gig and hope it leads to more work. If it does, he can then point out the restrictive clause or, if this future works makes it viable, stump up for the full cover.

Apologies for the real world solution, I know it doesn't fit the fantasy world some members seem to live in but there you go.

You are coming up with way more than I put in my post. Wherever did I suggest he'd be given lots of similar work? I didn't.
Making stuff up is rather desperate even for you. Your fantasies do not appear to be related to the real world the rest of us live in.