Whether you run a small management consulting business or a larger firm, there are a variety of liabilities that could arise in the course of your work. Your clients rely on you to provide expert advice and assistance that will help their companies succeed. If your guidance doesn’t meet their expectations and they believe you have acted negligently, your clients could sue you. Even if the lawsuit has no merit, legal defense can be very expensive. In addition to these professional risks, you could be held liable for risks that are common to most companies, such as workplace injuries or cyber liability.

If your consulting company must cope with a costly lawsuit or settlement, it could consume a large portion of your resources. It’s important to obtain a broad range of insurance policies to financially protect you from these risks. Having the right coverage in the event of a disaster can help you and your employees through unforeseen calamities and keep you focused on growing your business.

What insurance coverage do I need for my management consulting company?

While there are many types of coverage for companies to consider, these insurance policies are particularly important for management consultants to consider:

Errors and Omissions Insurance

As a management consultant, your clients trust you to advise them on crucial aspects of their business. If they’re dissatisfied with the results of your work, they could sue you. No matter how conscientious your consultants are, there’s always a possibility that their recommendations could lead to unexpected consequences. Even if a lawsuit is groundless, legally defending your company can be costly. Errors and omissions (E&O) insurance can provide your company with financial protection if a client claims they suffered financial losses as a result of your professional work. Most clients will expect your company to have this coverage.

Example:

• Your management consulting firm helps a client streamline their supply chain system. Unfortunately, after the client implements the firm’s recommendations, their productivity is reduced and the client faces revenue losses as a direct result of your firm’s work. They sue your company with allegations that your advice was negligent.

Commercial Property Insurance

Commercial property insurance will protect the value of your business property if it is destroyed or damaged. This is an important type of coverage to consider for companies that work from office buildings and own valuable property. If an unexpected disaster strikes your office building or damages your office equipment, it can be time-consuming and costly to recover from the loss without insurance coverage. Commercial property insurance can help provide funds to replace or repair damaged business property. Commonly covered perils include windstorms, hail, fire, vandalism, and water damage.

Commercial property insurance covers the following:

• Buildings belonging to or leased by your company
• Contents of the building, including furniture, computer equipment, and artwork
• Property of others while it is under your care, custody, or control

Example:

• Someone breaks into your company’s offices over the weekend and steals laptops and other computer equipment worth over $30,000. Your property insurance would reimburse you for the loss.

General Liability Insurance

General liability insurance protects your company from claims of third-party bodily injury, property damage, personal injury, and advertising injury. If you meet with clients at your offices, visit clients at their places of business, or have other non-employees such as mail couriers or service technicians on your property, it’s a good idea to consider commercial general liability coverage. Although it may seem unlikely, there’s always a chance that an accident could occur in the course of your work, and your firm could be held liable for someone getting injured or damaging someone else’s property. Some of the most common accidents that occur in offices include tripping, slipping, falling, or having an object fall on someone.

General liability insurance can also include a personal and advertising injury component, which provides coverage for a number of non-physical injuries, including libel, slander, and copyright infringement.

Examples:

• Bodily injury: One of your consulting clients visits your offices. In the entryway of your building, she trips over some uneven pavement and falls, severely twisting her ankle. Your general liability insurance would cover medical costs and legal fees if the client sues.
• Property damage: Your team travels to a client’s office for a kick-off meeting for your upcoming consulting project. At your client’s office lobby, an employee trips and falls onto an expensive and fragile decor item, destroying it. Your general liability insurance would pay for the damages.
• Personal and advertising injury: Your company posts a regular blog about issues in management consulting. Your competitor sues you with the claim that one of your blog posts makes libelous statements about their business practices. Your general liability insurance would pay for the lawsuit and any settlements.

Business Owner’s Policy

If you own a small or midsize consultancy, it’s possible that you may be able to simplify your insurance selection with a business owner’s policy (BOP). This type of insurance combines general liability, property, business income, and extra expense coverage into a single package. A business owner’s policy can be a convenient way to obtain a wide range of insurance, helping smaller companies avoid coverage gaps. It is also typically more cost-effective than buying each policy individually. To qualify for a BOP, your company would typically be required to operate from a physical business location, employ fewer than 100 people, and make less than a certain amount in sales per year (typically $5 million, but it can vary based on the insurer).

Example:

• During a storm, high winds cause a tree to fall onto your office building, damaging its roof. The commercial property portion of your business owner’s policy would pay for repairs.

Additional Coverage

• Cyber liability insurance can cover financial losses that result from cyber events such as data breaches, hacking, viruses, denial of service attacks, and more. This is an important coverage to consider if your company relies on electronic data or stores personally identifiable information. Data breaches and cyber attacks have become more and more common in recent years and any sensitive data you may store on your employees or clients can be a serious liability.
• Employment practices liability insurance protects your business against lawsuits by employees who accuse your business of wrongful treatment, including discrimination, harassment, or other employment-related issues.
• Business income insurance will reimburse you for lost income and operating expenses if your business is unable to operate due to a covered reason, such as fire, storm damage, or other property damage.
• Workers’ compensation insurance is legally required for companies with employees in most states. It covers employees’ medical expenses and lost income if they are injured or fall ill on the job. It can also cover funeral expenses and death benefits for an employee’s dependents in the case of a work-related employee death.

Final Word

As you plan your insurance coverage, it’s important to be aware of the risks that your management consulting company could face. Business insurance can help your company cope with unexpected disasters, whether it’s a lawsuit brought by a dissatisfied client, an unexpected disaster that damages your office building, or a client injury that happens on your property. Ensuring that your company has a wide range of insurance coverage can give you, your employees, and your clients peace of mind, knowing that if a catastrophe occurs, your company will be financially protected.