Personal Indemnity Insurance
With more contractors taking out Personal Indemnity insurance, it will be more worthwhile companies suing them in the future.
At the moment, most companies won‘t sue contractors, because it just isn‘t worth their while to sue them. However, if there are several dozen contractors on a large project, then it would be well worth while a company suing them, jointly, for projects that run well over budget (as almost all projects do).
Although their companies have limited liability, many client companies are insisting that those limited companies take out Limited Liability Insurance before they‘ll sign a contract with them.
There are many areas in a project for which a contractor could potentially be liable.
Did they make the initial estimate, which was blown out of the water. If they did, what steps did they take to make sure the estimate was accurate?
The contractor – did they check it against industry standards for the language used? Did they check it against their own and their organisations previous productivity?
Programs – did they say that programs were 90% complete when they weren‘t so? Did the progam have errors in testing and production, when the contractor said that they were complete?
The specification – did the program do exactly as the specification asked, or something slightly different?
Did the contractor cover up the fact that he or she was behind schedule. Did they allocate time to tasks that they hadn‘t really started. You could look on all of these as negligence.
Of even more interest is how IR35 affects this. It might be thought that if a contractor is being taxed as an employee under IR35, his or her company cannot be sued for any liability. However, according to a tax consultant, who used to work for the Inland Revenue, this is not the case.
The contractor only gets treatment as an employee for tax purposes. He gets no other rights or protection from the law as an employee.
For all necessary business insurance, including IR35 and Indemnity Insurance, try Business Insurance for Contractors
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