The types of insurance you take out for your business depends on the business risks involved in the services you provide. Your insurance policy should cover you for the costs involved in defending claims, and paying compensation to injured parties.
Liability insurance protects you and your business against financial losses incurred when:
- A person is injured or suffers loss; or
- Property is damaged or destroyed as a result of your actions, negligence, the condition of your property or reliance on your services.
As a consultant and independent contractor, you should consider having public liability insurance and professional indemnity insurance. If you engage other workers as employees, you will also need workers compensation insurance.
Public Liability Insurance
If you operate from commercial or retail premises that can be accessed by the public, it is likely that your business will need public liability insurance. This type of insurance covers incidents of death or injury to third parties, property loss or damage, or economic loss caused by negligence.
If a person, business or contractor, is found liable for any of these types of incidents, then public liability insurance covers the costs involved with these claims. The policy provider, however, will assess each case differently, as they generally do not cover risks that you or your business knew or should have known.
There are laws in place which state the standard of care you should uphold to avoid liability in this regard, however, should you find yourself subject to a claim, this form of insurance limits your financial risk. You should ensure your policy provides for an adequate insurance amount. This will depend on the nature, type and size of your business.
Professional Indemnity Insurance
This type of insurance should be taken out by those who give professional advice or perform services to clients through their type of work. This particularly applies to those engaged in consultancy work, as consultants provide their opinions and recommendations on a day-to-day basis.
Professional indemnity insurance protects you against claims if a client suffers loss through receiving your services or relying on your advice, and includes cover for legal costs. Many professions (for example, the medical profession) make this type of insurance compulsory.
This form of insurance provides payment to employees who are injured or become sick while completing their work duties. This can be to cover their wages, medical expenses, and rehabilitation costs.
If you employ staff for your business, you will need to take out workers compensation insurance. The regulator of workers compensation differs depending on what state you are in, for example, WorkCover regulates worker compensation in WA.
It is important to note that if the worker is involved with a business under a labour hire agreement, the business to which the worker provides their services is not their employer. Rather, the agency who places the worker with the business is the employer, and should have the necessary insurance.
What if a Claim is Made Against Me?
If you have had a claim made against you for any of the incidents described above, you should contact a lawyer to review and advise you on your insurance policy and legal position. Different legal standards apply depending on the type of claim, and it is important you seek professional advice.
The nature of your work and the services you provide will dictate the types of insurance you require. As a consultant and an independent contractor, it is important to consider obtaining public liability insurance and professional indemnity insurance. If you are unsure about which types of insurance is best suited to the risks applicable to your business, contact one of employment lawyers.