You probably already know that professional liability insurance may protect you in the event you make a professional mistake. What you may not realize is that professional liability insurance can also help shield you from the effects of a lawsuit or claim... even for a service you didn’t provide.
If you’re not sure how you could need insurance against something you didn’t offer or provide to a client, keep reading.
Because for many professionals, this could happen to you.
The Service You Didn’t Provide
Plenty of wedding photographers have horror stories about a couple who just couldn’t be pleased by the photogs on the big day, but Alonzo still has the memories of a lawsuit to go along with his cautionary tale.
Alonzo had contracted with a couple to photograph their wedding, as well as their wedding shower and a session for engagement photos.
After shooting the engagement photos and wedding shower, Alonzo and the bride began to clash. The bride pushed him to deliver photos before they were ready. She complained about the quality of the photos. She demanded a reshoot of the engagement pictures.
Alonzo soon realized there was little chance he would be able to deliver wedding pictures that would please this couple. With four months to go before the couple’s big day, he notified the bride and groom that he would not be able to shoot their wedding. He returned their deposit money as a show of good faith, and recommended another photographer who would be available on that date.
The bride and groom were furious. They brought a lawsuit against Alonzo for not photographing their wedding as contracted. They claimed the other photographer’s photos were subpar. They wanted to be reimbursed for the cost of the secondary photographer, plus “pain and suffering” for the trauma that Alonzo allegedly put them through by cancelling their contract before the wedding.
The wedding that Alonzo never took pictures of became a lawsuit and headache that he will never forget.
The Promise You Didn’t Deliver
April had made an enthusiastic pitch to her client. She was sure that her agency could implement strategies that would lead to a 20% increase in sales. Her client was impressed, and signed the contract.
Unfortunately, April ran into roadblock after roadblock while working with her client. She felt helpless as her proposed strategies were put on hold, reviewed, put on hold again, and even rejected by the client. She struggled to get the approval and resources she needed to get the results she promised.
When her contract was up, she was nowhere near to the 20% increase in sales revenue that she had promised her client. In fact, her efforts had gotten her only a tiny increase to report.
April felt dejected from the loss. But that was only the beginning of her issues. Because the (now former) client felt that her agency owed them the money it paid to her agency. And the client was prepared to bring a lawsuit against April and her agency for not delivering on her professional promise.
The Mistake You Didn’t Correct
Jason worked as a website design and developer, and had grown his business from the occasional freelance side-project to a full-time career. He was even able to hire his first employee. Business was good, clients were happy, and he had enough referrals to keep him, and his employee, busy.
Jason was working on a redesign project for an ecommerce store. His employee had mentioned that there was some “bad code” in the existing site, and Jason assumed his employee had taken steps to clean it up. Unfortunately, the code remained in place and the website crashed soon after the redesign was complete.
The online store was down for a week, resulting in lost sales and revenue. The owner of the store was livid, and brought a suit against Jason to cover the costs of repairing the site and to recover the lost revenue.
The mistake that Jason’s employee had made was not correcting the error when he came across it. Not correcting the mistake led to a costly lawsuit and one seriously unhappy customer.
Do You Need Professional Liability Insurance?
If you provide a service to clients or customers there is a very good chance you could benefit from the protective safety net of a professional liability policy. That’s why accountants, advisors, consultants, designers, developers, attorneys, photographers, and medical professionals consider professional liability insurance a must-have policy.
Professional liability insurance may cover the costs of lawsuits if you provide (or fail to provide) a service that results in harm or financial losses to your clients. Whether you’re found to be at fault or not, defending yourself against a lawsuit can get costly. Professional liability can keep the steep costs of lawsuits, attorney’s fees, settlements, and judgements from damaging your business.
And it can even help protect you from a lawsuit for a service you didn’t provide.