In order for professional people to protect themselves from claims of negligence, it is a good idea to carry indemnity insurance. Indemnity insurance protection works much the same way as product liability insurance. No matter how careful a service professional is in the performance of his/her duties, accidents happen. It is very possible that the customer will bring a lawsuit against the professional person's employer. This can damage the reputation of the company and without indemnity liability insurance can financially destroy the company.
Indemnity liability insurance can protect the company's professional reputation. For example, John Doe hires ABC Company to resurface his driveway. The type of surface material that John chooses is not designed for the harsh winters experienced in his northern state. ABC Company warns John that surface material is designed for year-round hot dry climates and will not hold up to the approaching winter. John insists because the cost is much less than the surface material ABC is recommending. Against their better judgment ABC complies with John's demands. The next spring, the driveway is buckling and cracking. Large holes are forming in his driveway. John files a lawsuit. After months of litigation, ABC wins the lawsuit. But what was the price not only in attorney's fees and court costs but to their reputation actually worthwhile? If ABC Company had purchased indemnity liability insurance they may have been able to settle out of court and avoid the lawsuit altogether.
To change the example slightly, John Doe has hired ABC Company to resurface his driveway. ABC recommends the surface material that is made for the harsh upcoming winter. John agrees and ABC orders the correct material from their supplier. The supplier makes a mistake and ships the cheaper surface material. ABC's employees are busy with projects all over the county and no one notices the error until the work is completed. ABC's professional negligence makes them clearly at fault. John files a lawsuit. However, ABC Company is protected with the appropriate indemnity liability insurance, admits the error. The indemnity liability insurance covers the damages and the cost to apply the correct surface material. This claim is then settled out of court saving ABC thousands of dollars.
Indemnity liability insurance also provides ABC Company with legal advice which is invaluable in situations such as the one with John Doe. In today's business world, all too often the disgruntled customer will file a lawsuit. The damage to your reputation may ruin your business. It is extremely critical that businesses protect themselves from damaged reputations and financial ruin. Failure to protect your business with indemnity liability insurance can be a deadly, costly mistake for any business.