Why consultants should have professional liability cover

With the changing trends in the economy and job market, more professionals are venturing into consultancy to grow their careers, earn more income, be financially independent, or actualise a passion or hobby.

A consultant provides specialised services to a client ranging from providing information, solving problems, proposing actions or selling products.

However, consultancy comes with its unique risks.

Negligence by a consultant or a professional advisor, for instance, could occasion serious financial or business loss to a client.

An engineer supervising the construction of a building that collapses and kills or injures people may be exposed to a lawsuit for professional negligence.

A doctor who misdiagnoses an ailment leading to the death of a patient may be sued for negligence. Errors by an accountant could mean the loss of millions of shillings to a company.

Most consultant-client relationships are governed by a contract.

The latter comes with implied terms, one of which is that the advisor must exercise reasonable care in providing services.

However, even the most experienced professionals make mistakes, resulting in financial and legal liability claims by clients and third parties.

With more people aware of their legal rights, coupled with huge court awards, professionals like doctors, architects, accountants, engineers, lawyers, IT experts, and financial advisors, to name a few, are now more exposed to financial liability in the course of their work.  

This is where insurance comes in to address the risks associated with malpractice or negligence. Specifically, Professional Liability Insurance (PLI) or Professional Indemnity Insurance (PIL), is a policy protecting us against risks and financial liability arising from malpractice or negligence.

PLI covers against unexpected situations that could lead to financial loss for anyone providing specialised services.

Considering that many professional consultancies are small entities, the likelihood of insolvency in the event a court awards damages running into millions of shillings to a client is quite high. PLI policies cover an array of risks including court awards, legal fees and expenses.

At AAR Insurance Kenya, we have seen a trend where professionals are keen on taking out indemnity covers. We often advise customers to take into account the unique risks in their businesses in coming up with the appropriate risk coverage.

Among the benefits of PLI policies include offering the last expense cover and continuous coverage in retirement. With digital insurance, you can get a PLI cover in five minutes online.

Ms Ndegwa is the chief operations officer at AAR Insurance Kenya