Home Forums Money matters Professional indemnity insurance for consulting to USA and EU customers

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  • #1000167
    KarenC1972
    Member
    • Total posts: 4

    I am struggling to get professional liability insurance and can’t believe it can be this hard. I’ve been in business 5 years as a specialist consultant to the international food industry, consulting on compliance, food fraud and risk. Surely I’m not the only online consultant who exports their expertise offshore?

    I believe a key problem is that much of my revenue comes from USA.

    I am a sole director of a Pty Ltd company. I (perhaps wrongly?) believed that the Pty Ltd structure would protect my personal assets if something went wrong with the compliance work. However I have been told that an aggressive plaintiff could sue me personally as the director, and in that case my personal assets could be at risk.

    Honestly, if the business assets were lost in a lawsuit it wouldn’t be the end of the world. However it isn’t fair on my family to put my personal assets at risk.

    I’m told that management liability insurance could be the answer but I’m not having much success with the brokers that I have spoken to thus far. I think I’m in the too hard basket!

    Can anyone relate? Have you solved the problem?

    Karen

    #1223243
    KarenC1972
    Member
    • Total posts: 4

    Hi,
    just an update in case anyone else has this problem and finds this thread. I finally found an insurance broker who got me a quote. It was Elders Insurance Ulladulla, whom I highly recommend. The insurance company was Berkley. The yearly premium was around $3.5K for worldwide coverage.

    I also sought some advice from an Australian lawyer who specialises in online businesses about the risks to my personal assets and trading uninsured.

    In a nutshell, her advice was
    – getting insurance companies to pay out for PI is so difficult that it’s rarely worth paying for it, especially for USA coverage
    – the Pty Ltd structure is excellent protection for your personal assets*, even for a sole director & consultant. However, you do have to make sure your website ownership, contracts, website footers and terms and conditions for services and products all directly reference the Pty Ltd company, rather than you personally.
    – Obviously don’t do any work without first having a good contract between the customer and the Pty Ltd company (get a good one from an Australian lawyer)
    – The Pty Ltd structure won’t protect your personal assets if you do something criminal or fraudulent. However, if you make a genuine mistake as a consultant, your personal assets should be okay.

    *the company assets are still at risk if you trade uninsured.

    Hope that is helpful.
    Karen

    #1223244
    Paul – FS Concierge
    Keymaster
    • Total posts: 3,173

    Hi Karen,

    Your feedback is of very high quality and appreciated.

    Thank you.

    Cheers

    #1223245
    MattDell
    Member
    • Total posts: 52

    Hi Karen and all
    Thanks for the shout-out and I am pleased that we connected here via FS!
    Also glad we could help where others could not – or more accurately couldn’t be bothered to try :)
    I understand your points and decision to consider running without insurance
    Just writing to say a couple of things that might help others
    1. The value of Liability or Prof Indemnity cover increases relative to turnover. Your quote of $3.5K might only raise slightly if you turnover doubled or tripled. In other words the more you grow the cost becomes relatively cheaper. :)
    2. Your position of doing a lot of work OS influences your position
    A client might not pursue you legally internationally for smaller claims due to the cost and difficulties. For businesses trading locally this may not be true
    3. Many significant contracts would require a Director Personal Indemnity agreement to be signed. This would negate any protection for personal assets of the director

    I always like to give clients enough information to make informed decisions. Whilst I could not recommend anyone not insure themselves it is good that you have the option :)
    if we can ever help you or any other FS members in future just reach out
    All the best :)

    #1223246
    bb1
    Participant
    • Total posts: 4,485
    KarenC1972, post: 270113, member: 117839 wrote:
    In a nutshell, her advice was
    – getting insurance companies to pay out for PI is so difficult that it’s rarely worth paying for it, especially for USA coverage
    – the Pty Ltd structure is excellent protection for your personal assets*, even for a sole director & consultant. However, you do have to make sure your website ownership, contracts, website footers and terms and conditions for services and products all directly reference the Pty Ltd company, rather than you personally.
    – Obviously don’t do any work without first having a good contract between the customer and the Pty Ltd company (get a good one from an Australian lawyer)
    – The Pty Ltd structure won’t protect your personal assets if you do something criminal or fraudulent. However, if you make a genuine mistake as a consultant, your personal assets should be okay.

    *the company assets are still at risk if you trade uninsured.

    Hope that is helpful.
    Karen

    I just hope you got that in writing to say don’t bother with insurance so that if / when it goes down the tubes you can sue her. Although they do always say it is only advise in general to cover their butt.

    I had to laugh at this statement from her ”your personal assets should be okay. ”, never accept a should, they either are or aren’t, otherwise the advise you have received is worth nothing. again butt covering.

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