5 ways tech consultants can manage their professional liability exposure
Avoid lawsuits by managing your tech E&O risks
Many clients don't understand the nuances of the technology they use, and that knowledge gap is where errors and omissions risk blooms. If clients have unrealistic expectations, it can lead to frustration and lawsuits.
You can balance your client's expectations and your own technology E&O risk through contracts, communication, dispute resolution, careful work, and errors and omissions insurance. The latter is one of the most important policies for IT consultants.
Here are five tips to help manage your professional liability exposure and reduce the risk of being sued.
1. Use contracts with everyone
The temptation to forego written contracts may be strong, especially when you are first starting a consulting business or working with people you know well.
Your early clients are often acquaintances or friends, and the same is usually true for your subcontractors and part-time help. That familiarity can make contracts seem unnecessary.
Here's the problem with that: People tend to remember events in a way that best suits their needs. That means memories from different parties might not always be aligned. Settling disputes can get downright unpleasant, and they could escalate into E&O lawsuits.
A written contract keeps everyone on the same page and manages expectations. Make sure your contract details:
- The scope of the project
- Each party's responsibilities
- Important deadlines
- Your fees
Contracts are valuable in all of your business dealings. Use them with clients, employees, 1099 contractors, and subcontractors. While you're at it, you may want to require contractors to have their own technology errors and omissions insurance for protection from work mistakes.
2. Communicate clearly and frequently
When a client hires you to complete an important job, they probably expect a little delay before they see results. But if weeks pass and they get nothing but radio silence, they might start to wonder what's going on.
Communicate with your clients to help put their mind at ease. Check in often and be sure to:
- Send updates when projects change, even when they change for the worse.
- Send an email confirming any verbal exchange with the client so you have a record of how the project progressed.
Don't forget to amend your contract to reflect changes in the project's scope and make sure your client signs off.
3. Create a complaint resolution system
Tech consultants are often unsure how to respond when their clients complain. However, creating a system for handling complaints doesn't have to be complicated. You can type up a single-page resolution policy that requires you to:
- Acknowledge and document the complaint
- Investigate the complaint
- Resolve the complaint
- Communicate the resolution to the client
- Follow up in a timely manner
Documentation is key here. If a complaint turns into a lawsuit, you have a record of your attempts to resolve the problem.
4. Double-check your work
This sounds obvious, but it's a step that's easy to overlook with a fast-paced and dynamic project. It pays to double-check your work against your written contract to make sure you lived up to your end of the bargain.
5. Get technology E&O insurance
You can do everything right and still be named in a frivolous lawsuit. When that happens, errors and omissions insurance (also known as professional liability insurance) can be a lifesaver. Coverage helps you handle legal disputes by helping you pay for:
- Attorney's fees
- Court-ordered judgments
- Investigation costs
Lawsuits, even ones without merit, cost time and money. E&O insurance can minimize the financial burden. Protect your business and apply for coverage to receive free policy quotes from leading carriers.
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