Whilst management consultants all over the UK happily advise their clients on how best to structure and operate their businesses, many continue to ignore the increasingly likely prospect that a disgruntled client may one day choose to seek recompense through the courts if something goes awry.
For example, one management consultant acted as an interim finance director for a customer. The customer subsequently sued when their company suffered a downturn. They claimed the management consultant's strategic advice was the cause of their financial difficulties.
Whether their claim is justified or not is somewhat irrelevant given that a huge legal bill will be awarded to both parties - whatever the outcome of the actual case. The sensible solution to any future threat of litigation is to take out an adequate professional indemnity insurance policy as soon as possible.
Management consultants insurance offers protection against claims for loss or damage by a client or a third party if a management consultant has made mistakes or is found to have been negligent in some or all of the services that they have provided. Give the scope of the management consultant's role, these can be wide-ranging.
One case involved management consultants advising on a large restructure who found themselves in trouble when their redundancy advice was not completely correct. The tax office found the redundancies could not be classified as such as the company re-advertised the positions shortly after. This meant the company had underpaid their tax.
Another case involved a management consultant who was employed to undertake a management survey of a large company. They had been collecting data for four months when disaster struck and the computer server that held this data failed and the data was lost.
All insurance policies of any type carry details of the insured risks, exclusions and conditions. Management consultants insurance is no different policies must be tailored to suit from the outset. Management consultants should consider potential liability timescales and who the sort of clients they may encounter - a freelance working with medium-sized clients may want a different level of protection than a large consultancy dealing with international firms with large turnovers.