You’ve courted that halo client, agreed the price, and if the deal is big enough ordered a Bentley. But then you notice it’s subject to their terms of business, not yours.

You have a quick glance, everything seems ok but blinded by the deal you sign them and put your copy in the filing cabinet. They will only see the light of day again if something has gone wrong!

But you need to ask yourself why the client insisted on using their terms. The main reasons larger organisations do this is because it’s easier for them to manage their procurement base as every supplier is on the same terms. Whereas yours gets more complicated as you have more and more clients on different terms.

However, there is a slightly more sinister reason why they do this. It is to make you accept more responsibility than you would normally. In a lot of cases it’s to make you accept ALL the liability in the contract.

This is especially important in the recruitment sector. There is a growing trend with larger organisations to make recruitment companies responsible for the actions of the contractors and temporary workers that are supplied to them.

There is a legal term for this. It’s called Vicarious Liability, accepting the liability of others. Which with contractors or temporary staff is essentially out of your control. You are being deemed responsible for people’s actions that you have no control over.

Now here’s the rub. Most Professional Indemnity Insurance policies, particularly those for recruitment, specifically exclude Vicarious Liability. They only cover the negligence of your own directly employed staff, not the contractors!

If you have signed up to your client’s terms of business, especially if you are a recruitment company (even more so if you are recruiting in the IT sector) then I urge you to dig out all the client terms of business you have signed up to and review them.

In this review you need to pay particular attention to:

1. The section of the contract that deals with liability. i.e. it will set out which parties to the contract are liable for what. Usually it will be easy to spot under a section entitled liability.
2. The section of the contract that covers what level of insurance they require you to have. It is becoming more common to see requirements of £5m or even £10m for both your Professional Indemnity Insurance, and your Public Liability Insurance.

You then need to dig out your insurance and compare what cover you actually have against what you need.

If you find you are vicariously liable, and you supply contractors or temporary staff, then you need to review how much Professional Indemnity cover you insist they have. It’s hardly fair that you are possibly assuming £10m of liability for them, but they only have £1m of cover. Especially if they are tinkering with Banks or other Blue Chip company’s IT systems.

At this point I must point out that you really should get the whole contract checked by your legal counsel, but with regard to the points above a good insurance broker will be able to review those for you.

At Lockyers we offer a free Professional Indemnity Review service, whether your insurance is due for renewal or not. Don’t leave it till tomorrow, get digging those contracts out and call us in for a review.

To book a PI insurance review call myself, Jon Newall on 01924 278222 now!