April, 2015

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Independent Contractors and MPL Insurance

Independent Contractors and MPL Insurance

While most companies could benefit from having professional liability insurance to protect against claims of error or negligence, the tech industry is particularly susceptible, in part because Internet technologies (IT) are so new and constantly changing.

Laws are still being defined and shaped, so there’s no clear standard on what constitutes acceptable and reasonable client expectations or even on what the responsibilities of an IT consultant are. There are simply not enough legal precedents within this industry yet. To protect yourself you should purchase miscellaneous professional liability (MPL) insurance to deal with claims arising from the services you provide.

Dissatisfied clients are likely to bring claims

IT claims usually occur when clients perceive that they’ve suffered a loss (financially speaking) due to some type of an error you made, or perhaps something they believe you should have done but didn’t. A claim could also arise when a client simply isn’t satisfied with the results of a job you’ve done for them.

Client expectations are difficult to gauge, and if your solution doesn’t deliver in their mind, despite your understanding that it functions exactly as agreed, there’s going to be an issue. Ideally, you and the client may negotiate a solution, but if that doesn’t occur, your client may end up suing you claiming that you caused them a financial loss or for interruption of services. Another problem you could encounter is dishonest clients who may decide to sue to avoid paying monies that they owe you.

Determining your need for MPL insurance

It’s important to assess your risk and consider this vital coverage, because as an independent contractor, you aren’t likely to have the financial resources of a big company to back you up in the event of a lawsuit. In addition to your own needs for a policy of this type, more companies have recently begun requiring independent contractors to carry liability insurance when working on a project for them.

You can also assess your risk based on the type of work you perform, the clients you take on, and how well your contracts are able to shield you from this type of lawsuit. You should evaluate your need for MPL insurance, especially if any of the above scenarios ring true to the services you generally provide to your customers. This coverage may be necessary, in addition to any general liability policy you may have, in order to protect you in the event that a client does sue.