Financial Services – Indemnify yourself

Mark Boon explains why arts organisations might be glad they have Professional Indemnity insurance.
This is all about cock-ups  which we all make. As our society becomes more litigious and a compensation culture develops apace, arts professionals (whether individuals or organisations) are increasingly at risk of being sued for wrong advice or incompetence. These days, its therefore verging on the irresponsible to be without Professional Indemnity (PI) insurance.

In todays political environment of European harmonisation and consumer protection, its difficult to keep up with changes in the law. Organisations can find themselves embroiled in expensive disputes without realising they have done anything wrong. Failing to defend these allegations properly could cause irreparable damage to the reputation and financial stability of their organisation and expose directors to allegations of mismanagement, for failing to purchase adequate insurances.

PI insurance protects your organisation by paying for the legal and compensation costs arising when you make a mistake in the advice and services you provide. Unlike Directors and Officers insurance (which protects the individual), its about your professional competences within the organisation, not your role in managing the organisation.

Professional Indemnity insurance is particularly important when an individual or organisation is providing strategic advice or acting as an agent. In law, any organisation that provides professional services or advice owes a duty of care to clients for competent advice and service. If your advice is poor quality or you fail to deliver (or miss a deadline), and the client suffers financially you may be liable in law for the losses suffered.

An army of freelance consultants now serves the arts with advice in marketing, business planning, finance and strategy. A silly mistake can turn things sour, leaving tarnished reputations and dispatching hard-won cash to the plumbing system. In the creative industries, missed deadlines, typographical errors and inadvertent breach of copyright cost millions of pounds every year in legal costs and damages.

PI insurance covers:
” Professional negligence: breach of professional duty (through negligent error, act or omission)
” Infringement of copyright, title, slogan, trade mark, name, moral patent or performing/broadcast rights
” Libel, slander or defamation
” Breach of confidentiality
” Infringement of rights of privacy or publicity.

If your organisation acts as a consultant or agency, make sure your policy includes in-house losses such as purchases made in good faith on behalf of a client who is dissatisfied and refuses to pay. It should also cover the rectification of a problem if there is a way of mitigating costs and avoiding an expensive liability claim  e.g. a re-print of a brochure with typographical errors. This way you can rectify a mistake before your client is even aware of it.

For all arts organisations and consultants, assessing liability and seeking professional advice on insurance options can provide security against potentially damaging costs. n

Mark Boon is Managing Director of arts and entertainment insurance broker La Playa.
e: [email protected];
w: http://www.laplaya.co.uk

Professional Indemnity insurance: protecting arts organisations from financial problems

” A new recruit devised a new database system based on one they had devised for their former employer. The former employer sued for breach of intellectual property rights.
” An arts organisation lost original artwork when its printers office was broken into  PI insurance covered generation of new artwork.
” A junior marketers promotional letter accused 15 named competitors of dishonesty. Defence and settlement of the 15 subsequent libel cases were picked up by a sound PI policy.
” An event manager had to re-print a programme when they misspelt the keynote speakers name  the bill was picked up by the PI insurer.
” A fire at a printers caused concert programmes to be delayed. The PI insurer arranged an alternative printer quickly enough to mitigate the potential loss of income from programme advertisers and audience if the deadline were missed altogether.
” A publisher produced an in-house magazine that juxtaposed an article with a celebrity photo, which, it was argued, suggested the celebrity had endorsed a product. Their PI policy covered legal advice and an amicable settlement  totalling £53,000.
” A telemarketing consultant misinterpreted their own data and advised a client to roll out a campaign nationally despite appalling take-up. Their PI policy covered a £100,000 out-of-court settlement.
” A consultant acted as interim finance director for a customer. The customer sued when the company suffered a financial downturn, alleging the strategic advice given had caused the downturn.
” A marketing consultant subcontracted an agent to arrange holidays as competition prizes. The agent failed to deliver and the promotional companys client sued.