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Professional indemnity insurance: who needs it?

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Who needs professional indemnity insurance? Easy. Any business that provides professional services or advice. But wait! You’re not a high-flying doctor, lawyer or financial advisor, you’re just a small business – does it really apply to you?

The reality is that professional indemnity insurance doesn’t apply only to traditional professions. These days individuals and businesses pay all sorts of people for their advice or commentary, which means professional indemnity insurance applies to fitness instructors, freelance journalists, hairdressers and naturopaths too.

Here’s the thing. If you deal with clients all day, every day, and they pay a fee for you to advise them on extending their eyelashes, safely storing archives, planning their dream wedding, providing the most efficient alternative energy solution, translating a legal document, offering an aged care solution (get the idea?), there’s potential for them to be unhappy with the service they paid for. If things go wrong for them the amount of their financial loss could be much more than the fee they paid to you.

Sure, you might have made a mistake yourself or been misunderstood, or the client’s own circumstances may have changed. But if a client takes you to court – even if you’re in the right – you could still be up for thousands of dollars in court costs. If they spread it around on social media or go to the press, you could lose your professional reputation.

Case study

Take what happened to Beauty Salon Beth*. Beth is a fully trained and certificated beauty therapist with her own business, and she also carries a line of salon-only skincare products to sell to customers as added-value items.

After giving one of her clients an in-salon facial peel treatment she also sold the woman a 10 per cent solution glycolic acid peel to use weekly at home. This is a standard maximum concentration for home-use products. At the time Beth explained that the peel should be used no more than twice a week, left on for 20 minutes before rinsing off, and that it should never be applied to the under-eye area.

Three weeks later the client returned to show Beth the red, inflamed skin under her eyes. When Beth pointed out that she hadn’t used the product according to either her verbal instructions or the directions on the packaging, the customer insisted that Beth had told her to use it twice a week and she had simply applied it to her face as advised.

After making a scene in front of another customer, the client stormed out and a few weeks later Beth received a summons to a damages case to answer. Even though Beth was not at fault since the client had ignored the instructions for correctly using the product, her lawyer advised her to settle out of court rather than risk exposing herself to local gossip and negative publicity.

Fortunately Beth’s PI insurance covered her for both her legal fees and the settlement sum.

*Not a real person

Being covered is more valuable than being right

Whether you made the alleged mistake or not, professional indemnity insurance provides protection without the financial strain of having to defend yourself.

Just because you’re a small business, don’t write off the need for professional indemnity insurance. An experienced broker can help you with the right cover for your business and the services you provide.

If you are in the beauty industry and this article has raised any questions for you, Gallagher has a team of experts that can help you put plans and policies in place protect your beauty therapy business from this and other risks. Please feel free to contact our friendly team to chat about how we can help you continue to grow, even when life throws the unexpected your way.

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