Top 5 Consultant Insurance Claims
You’re a problem solver by nature, but no one can predict everything. Accidents, misunderstandings, and even the best-laid plans can lead to costly insurance claims. Knowing the most common claims consultants face helps you stay prepared and protected.
What Are the Most Common Insurance Claims for Consultants?
Consulting insurance might seem like one of those costs you could skip… right up until a claim puts your business in a bind. From simple mistakes to unexpected breaches, these are the five most common claims that could put your business at risk.
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1. Errors and Omissions
Just because consultants are hired for their expertise doesn’t mean they’re immune to mistakes. Whether it’s missing a small detail or giving advice that doesn’t turn out quite right, sometimes your best guess can end up costing a client more than they bargained for.
Here are a few examples of claims submitted by our insureds:
- A business consultant suggested a new marketing strategy to a client, but after months of implementation, the results didn’t meet expectations. The client blamed the consultant’s advice for the losses and filed a lawsuit.
- A financial consultant made an error calculating a client’s projections, leading to significant financial setbacks for the client.
Mistakes like this can leave you paying for legal fees, settlements, and possibly even hefty damages if you’re found at fault. Professional liability insurance, also called Errors and Omissions (E&O) Insurance, is designed to cover these types of costs if a claim arises from mistakes or advice you gave that doesn’t deliver as expected.
2. Intellectual Property Issues
Contracts often specify conditions such as who owns the work you produce and how either party can use reports, strategies, plans and so on. If there’s any confusion about who owns the intellectual (and often proprietary) property, you might end up in a legal mess.
Consider these real-life scenarios:
- A consultant developed a detailed growth strategy for a client, only to be accused of using parts of the same plan with another client.
- A client claimed ownership of a custom report created for their business and alleged that the consultant was using it elsewhere without permission.
Intellectual property issues can quickly turn into expensive lawsuits, even if you believe the issue is covered in your contract. Without insurance, you could end up being the one left paying for the legal fees and damages that pile up.
Luckily, professional liability insurance can help with these kinds of claims, covering your legal defense costs and helping settle disputes. It’s a smart way to protect your creative work and avoid a situation where a lack of clarity about “who owns what” becomes a financial burden.
3. Hacking and Leaks
Consultants often handle sensitive client information like business plans, personal details, and financial data. If your data gets hacked or leaked you could be hit with costs for data restoration, client damages, and more.
Here’s what could happen:
- A phishing scam can trick you into clicking a malicious link, exposing confidential client data to hackers.
- A system vulnerability can lead to a breach, and clients’ financial details can be leaked online.
Data breaches are more common than you might think, even for small companies. In fact, 41% of small businesses were victims of cyber attacks in 2023. From legal fees and notification costs to damaging your reputation, this can be a serious issue for your business.
Cyber liability insurance is designed to cover costs related to data breaches or cyberattacks. It can help pay for things like recovery, legal defense, and notifying clients that their data has been compromised.
4. Property Damage
No matter where you work or how careful you are, accidents can happen.
For example, you could:
- Knock over a cup of coffee during a meeting, spilling it onto a client’s laptop, causing irreversible damage.
- Move your client’s projector to adjust the setup for a presentation in their conference room, only to drop it and shatter the lens.
- Bump into a shelf at your client’s home while setting up your materials, causing an expensive vase to topple and break.
- Accidentally unplug critical equipment belonging to a venue during a demonstration, resulting in system malfunctions or damaged hardware.
With general liability insurance, you’re covered for accidents like third-party property damage. It helps cover the cost of repairs or replacement without you having to pay out of pocket.
Note: General liability covers the cost if you damage the property of others. But you can also protect your own business equipment from theft or loss by adding Inland Marine (aka Tools & Equipment coverage) to your general liability policy.
5. Confidentiality Breaches
Consultants regularly handle sensitive business information, and a breach of confidentiality can have serious consequences.
Some scenarios include:
- Sharing a client’s proprietary information without realizing it was covered by an NDA (non-disclosure agreement).
- A misunderstanding about what details could be shared in a public report led to an unintentional disclosure.
Professional liability insurance can help protect you if you inadvertently break confidentiality, covering the costs of legal fees and damages that result. It’s a good idea to always double-check what you can and can’t share, but insurance has your back if a mistake occurs.
How Do I Avoid Consultant Business Risks?
Here’s how to keep your consulting business running smoothly and avoid some of the most common pitfalls:
Start with a Clear Contract
Make sure every project starts with a solid contract. Define exactly what’s being done, what’s expected, and what the boundaries are. A good contract goes a long way in preventing misunderstandings that could lead to disputes or even lawsuits.
Keep Your Skills Fresh
No one wants to be caught giving outdated advice, and a mistake based on old info could lead to a claim. Staying updated on trends and best practices in your field shows clients you’re committed to providing the best service possible.
Communicate Openly
One of the easiest ways to avoid a claim is to keep your clients in the loop. Regular check-ins and updates help set expectations and reduce the chances of misunderstandings down the line.
Tailor Your Insurance to Your Niche
Each type of consulting comes with its own set of risks. Some consultants might face claims over strategic advice while others may be more susceptible to data breaches or cyber incidents. Choose insurance that matches the specific risks of your consulting field so you’re properly covered and don’t have critical gaps in protection.
How To File a Consultant Business Claim with Insurance Canopy
Filing a claim with Insurance Canopy is straightforward and stress-free. Once you’ve secured a policy, you’ll gain access to an online dashboard designed to help you manage your policy and file claims efficiently. Here’s how to get started:
- Log in to your dashboard
- Find “Manage Policies”
- Click on “File a Claim” and share your info
Once you’re done, a claims adjuster will get in touch to assist you. They’ll be with you every step of the way to ensure the claims process goes smoothly.
If you’re having trouble submitting a claim, our support team is here to help at any time.
Does Filing a Claim Impact My Insurance Premiums?
Filing a claim for your consulting business may lead to higher premiums, especially if there’s a history of multiple claims. Insurers could see this as an indicator of increased risk. Reduce the chance of premium increases by minimizing risks in your work and saving claims for situations where they’re absolutely needed.
Consultant Professions We Cover
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Don’t wait for a claim to catch you off guard. Stay ahead with the protection your business needs and explore coverage options with Insurance Canopy today!
Allison Kirschbaum | Copywriter
Digital Content Specialist, Allison Kirschbaum leverages her experience in providing in-depth content such as blogs, whitepapers, and downloadables about insurance, liability, and the challenges small businesses face every day. Before working at Veracity, Allison freelanced her copywriting skills, including optimizing rankings and generating leads across various sectors. She is now fully trained on Insurance Canopy’s products and helps small business owners navigate their insurance needs.
Digital Content Specialist, Allison Kirschbaum leverages her experience in providing in-depth content such as blogs, whitepapers, and downloadables about insurance, liability, and the challenges small businesses face every day. Before working at Veracity, Allison freelanced her copywriting skills, including optimizing rankings and generating leads across various sectors. She is now fully trained on Insurance Canopy’s products and helps small business owners navigate their insurance needs.
JoAnne Hammer | Program Manager
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
