Careering all over the place
Generally speaking, most professional people buying professional indemnity insurance only, really, have to think about themselves.
If you’re a recruitment consultant or employment agency, however, you’ll know it’s slightly different. There’s a unique, additional risk to your business: the people you place.
But why are they a risk? You're not responsible for their work are you?
It's possible, yes, and the answer lies in the contracts you have with your clients. Either way, you'll need to find out. And then find out if your insurance covers it or not.
Here's a simple why-it-matters explanation.
A recruitment consultant’s job is to source and place staff for clients. But you know that.
What you might not know is professional indemnity insurers have identified two fundamental risks with that:
- Your negligence when sourcing and placing staff
- The negligence of the staff you place
Here's the important bit.
Because these risks are clearly defined, insurers separate cover into two different policies. So, recruitment consultant's insurance covers either: your negligence only or your negligence and that of the staff you place.
These are called, respectively, non-vicarious and vicarious policies.
You might think you have one type of policy when, actually, you have the other. And that matters because it could mean you’re not covered when you think you are.
If your contracts state your job is to find and place staff for your clients, and that's it, then that's where your liability ends. You can *only* be sued for your negligence within those contracts.
In other words, your responsibility ends with making sure you get the right people for the job. Non-vicarious insurance is enough because you only need cover for you.
If one of the guys you've placed turns out to be hopeless and your client sues you for the consequences of his/her mistakes, however, you'll need vicarious cover. If you haven't got it, you'll have to fight the allegation and compensate your client yourself.
Know your limits
Whether your insurer is happy to offer vicarious cover or not depends on the nature of your placements’ work. It’s unlikely to be included as standard. Ideally, your insurer or broker should ask you about this when you buy your policy.
Understandably, insurers are more comfortable vicariously covering the work of relatively low-risk, office-based staff (admin, IT etc) than high-risk, high-value people (nuclear engineers, bankers etc). This is particularly so if lots of staff are placed at any one time.
Likewise, they prefer permanent staff to temps. There’s usually a more robust recruitment process for permanent staff so they're a lower risk.
So, if your niche is placing temporary oil rig workers then it’s pretty unlikely you’ll have vicarious cover.
Our advice is: don’t assume either way.
Your policy wording will tell you what cover you have. It’s possible it's hiding behind some insurance jargon though so, if it’s clear as mud, call us and we’ll decode it for you.insurance explainedmanaging risknegligencerecruitment consultantsvicarious and non-vicarious liability