If you advise, develop software, or produce campaigns and content for clients, your greatest liability risk is rarely spilled coffee on someone else's laptop. Of course, that can happen too – and that is what general liability insurance is for. However, in these business models, the much more interesting question is: What happens if your actual work for the client causes financial damage?
In insurance terms, we then speak of financial loss. That is precisely what professional indemnity or financial loss liability insurance is for. And it should match what your company actually does as closely as possible.
On the other hand, it also sometimes depends on the clients: Some service providers are required in their service contracts to prove liability coverage up to a certain amount upon request.
Consulting: When a recommendation has consequences
In consulting, liability often arises in quite unspectacular ways. An incorrect deadline, an overlooked piece of information, or a recommendation on the basis of which the client makes an economic decision can be enough. In one real claims example, an incorrect deadline for subsidies was given during a consultation – as a result, the client missed out on a subsidy of 16,000 euros. In another case, an incomplete site assessment for a logistics center led to a claim for damages exceeding 750,000 euros.
That is why in consulting professions, looking only at classic personal injury and property damage is not enough. Depending on the activity, professional indemnity should also cover errors in consulting and project work, poor performance, delay damages, or breaches of ancillary contractual obligations. Modern consulting also quickly becomes broader than the job title on the business card: project management, IT consulting, marketing consulting, or now also the use of AI can long since be part of the same activity.
Agency & Content: The work is published
For agencies, but also content creators and social media offerings, another risk area comes into play: The result of the work ends up out in the open. Images, texts, brands, campaigns, or designs can infringe on third-party rights. At the same time, the classic service risk remains – for example, if a campaign starts too late or an error on the client's part causes additional costs.
Specialized professional indemnity solutions can therefore also cover claims arising from copyright, trademark, licensing, or personal rights. Even AI does not necessarily make the topic any easier: In one claims example, a generated image was used for external communication that was too similar to existing graphics: This resulted in claims for damages due to infringed image rights.
Especially here, it is worth taking a close look at the description of activities. Today, "marketing" can mean anything from strategy to graphics and web design, campaign management, and the use of AI. The insurance should reflect the reality of the business and not the version of it that was written on a form sometime during its founding.
Tech: When an error continues at the client's end
In the tech sector, the basic logic is similar. A programming error can stop processes, damage data, calculate deadlines incorrectly, or lead to a client being unable to fulfill their own obligations to third parties.
A claims example: An AI-based contract analysis that recognized termination and rent increase deadlines incorrectly, resulting in financial losses and additional costs totaling 120,000 euros. In another case, an IT service provider accidentally deleted data from a production system; production processes ground to a halt, and the client claimed more than 90,000 euros.
It is also important here to distinguish it from cyber insurance. If your professional or technical error causes financial loss to the client, we are generally talking about professional indemnity. If your own company is hacked, data is held hostage, or you need IT forensics, legal advice, and crisis support, we are moving more into the cyber sphere.
What I look for in liability insurance
The product name alone is therefore of limited help. It is more important whether your actual activities are insured and what damages can arise from them. It looks different for a management consultant than for a creative agency, and different for a software start-up than for a classic IT consultancy.
Added to this are points such as contractual liability, delay damages, third-party rights, freelancers, activities abroad, and of course the sum insured. Good liability insurance also examines claims for damages, pays justified claims, and fends off unjustified ones. Especially this so-called passive legal protection is often at least as important as the pure payment of damages - more on this in the blog post on liability vs. legal protection.
The next step
If you want to know whether your professional indemnity insurance fits your company, I would therefore not start with the sum insured. First of all, your business model needs to be put on the table: What do you promise your clients, what decisions do they make based on your work, which systems or data do you touch, and how expensive could an error at the respective point become?
After that, it is possible to analyze quite objectively which liability risks are actually relevant, what coverage is needed for them, and whether your existing insurance has grown with your company. And if we are starting completely from scratch – I have already had a lot of fun getting to know a start-up by being used as pitch practice.