Management and Business Consultant Insurance

For most trades the policy is the main document. For a consultant, the client contract decides how much exposure the policy is being asked to carry, and it is signed first.

Four clauses do the damage. An uncapped liability, where nothing limits your exposure to anything. A cap set far above your indemnity limit, which looks like protection and is not. An indemnity in the client's favour, which can commit you to losses beyond negligence including their own costs. And a promise of a specific outcome or saving, which converts professional judgement into a warranty that sits outside cover.

All four are routinely negotiated out or amended, particularly by smaller clients, and essentially never changed after signature. A liability cap at the level of fees paid, or a multiple of them, is a standard and defensible position. Getting a consultant's contract read before signing costs a fraction of one hour of a dispute, and it is the single most valuable thing in this profession.

Consultants scale their indemnity limit from fee income more often than any other profession, and it is the wrong reference point.

A fortnight of work on a systems selection can commit a client to a platform costing hundreds of thousands and years of disruption to replace. A restructuring recommendation worth a modest fee can carry redundancy costs, lost productivity and a failed business case. The loss belongs to the client and is sized by the decision you influenced, not by what you invoiced.

So the useful question is what the largest decision you advise on is worth, and whether a claim of that size would be survivable. Where contracts specify a limit, treat it as a floor. And check two things that are as important as the headline figure: whether defence costs sit inside the limit, and whether it is any one claim or in the aggregate, which matters a great deal if the same methodology was applied across several clients.

A large share of consultancy is delivered through chains, and each link tends to assume somebody else is insured.

If you work as an associate for a larger consultancy, their policy protects them, and your contract with them frequently passes liability down and sometimes includes an indemnity in their favour. Most will require you to hold your own professional indemnity at a stated limit before placing work, which tells you how they read it. If you use associates yourself, you are responsible to the client for their work, so take copies of their certificates and check the dates against the engagement.

The other pattern worth watching is an interim or embedded role. Where you are effectively acting as a director or taking operational decisions rather than advising, your exposure changes shape and may stray towards management liability rather than professional indemnity. If an engagement involves board-level decision making, say so when arranging cover rather than treating it as another advisory piece.

Consultancy disputes are documentary almost without exception, and they are won by whoever recorded the engagement properly.

Four documents do nearly all the work. A written scope stating what you were asked to do and what you were not. The data and assumptions you worked from, including anything the client supplied that turned out to be wrong, which is a frequent cause of a recommendation failing. A record of the recommendations you made and the ones the client declined on cost or appetite grounds. And a note of decisions the client took against your advice.

That last one is the most valuable and the least kept. A consultant who can show they recommended a phased implementation and the client insisted on a single cutover is in an entirely different position from one who cannot. None of it requires formality, only a habit of writing things down after meetings and sending them.

There is almost nothing in this policy except professional indemnity, so the questions are about that and about your contracts. We are an FCA regulated broker and will not tell you we are the best choice. These are the questions that decide it.