“What happens if I make a mistake that causes my client to lose money? What happens if they sue me?”
Thoughts like these can keep you up at night. The risks to your HR consulting business — both financial and reputational — are real, but they don’t have to spell the end for your livelihood.
HR consulting insurance can protect you from the fallout of an honest mistake. Let’s take a closer look at some common HR consulting insurance claims and how insurance can help.
The Biggest Insurance Claim Risks for HR Consultants
To better illustrate how these claims can happen and what they might look like, let’s follow one particularly unlucky HR consultant through a variety of incidents.
Meet Carmen — She owns a small HR consulting firm with three employees. She provides expert advice to corporate clients to improve their HR processes and strategies. Her clients range from large online retailers to smaller startups.
Counsel Results in Wrongful Termination Lawsuit
Scenario: The CEO of a fast-growing startup asks Carmen for advice and guidance on firing an underperforming manager. After reviewing the situation, Carmen tells the CEO they can proceed with firing the manager as long as they document poor performance.
However, Carmen was unaware that the manager in question had previously submitted a formal complaint alleging gender discrimination towards a senior manager at the company.
Shortly after the manager is fired, they file a wrongful termination lawsuit and claim the startup fired them in retaliation for this complaint. Because Carmen’s advice directly impacted the company’s decision to fire them, the manager names Carmen in the suit.
Estimated Claim: $250,000
Coverage Needed: Professional liability insurance — designed to cover legal defense costs related to your professional advice, including negligence, omissions, and other errors
Employee Steals From a Client
Scenario: Carmen assigns Jack, her newest employee, to help a mid-sized retail company set up its payroll and benefits administration.
Over several months, Jack secretly manipulates the company’s payroll records and directs small payments to his personal account. This scheme goes unnoticed for a while, and by the time the company realizes what happened, Jack has stolen roughly $60,000.
Estimated Claim: $60,000
Coverage Needed: Fidelity bond — meant to reimburse your client if your employee steals from them or commits a different criminal act, such as forgery or embezzlement
Laptop Destroyed in Car Accident
Scenario: While driving into the city to meet with a new client in person, Carmen is hit by another car at an intersection because the driver ran the red light.
Luckily, Carmen walks away with minimal injuries but quickly discovers that her work laptop was destroyed in the impact. Carmen has all of her files backed up on an external hard drive, but she needs to replace her computer ASAP to minimize the impact on her work.
Estimated Claim: $1,300
Coverage Needed: Tools and equipment (inland marine) insurance — designed to cover repairs or replacements for your mobile business gear when it’s stolen or damaged in transit
Laptop Destroyed in Car Accident
Scenario: Carmen rents a small office space for herself and her employees. Occasionally, clients will visit the office for a consultation.
While one of Carmen’s clients is leaving her office, he trips over an extension cord on the ground. The fall breaks his wrist, and his doctor determines he needs surgery to make a full recovery.
He sues Carmen to cover his medical bills and lost wages from the time he had to take off work for surgery, claiming her negligence caused his injury.
Estimated Claim: $50,000
Coverage Needed: General liability insurance — can cover legal fees and third-party medical bills when your business activities hurt someone
Damaging a Client’s Property
Scenario: Carmen visits one of her clients in their downtown headquarters one afternoon for a meeting with their HR department. They offer to formally introduce her to the CEO, which she happily agrees to.
However, upon entering the CEO’s office, Carmen accidentally knocks over a glass sculpture on display, shattering it on the floor. As if the embarrassment wasn’t bad enough, the CEO demands that Carmen pay for the damages she caused.
Estimated Claim: $10,000
Coverage Needed: General liability insurance — covers the cost of repairs or replacements to others’ property you damage while doing business
Laptop Compromised and Sensitive Client Information Stolen
Scenario: While working late at a hotel one night, Carmen connects her work laptop to the public WiFi network to finish reports for a client.
Because she uses an unsecured network, someone is able to hack into Carmen’s computer and access files containing sensitive information on one of her clients. This includes their payroll information and payment details, including credit card numbers. The client sues her for negligence.
Estimated Claim: $300,000
Coverage Needed: Cyber liability insurance — designed to cover costs associated with cybercrimes or data breaches, including notifying affected parties, recovering stolen data, credit monitoring, and legal costs if you are sued
Employee Injures Themselves on the Job
Scenario: Carmen and her employee, Jamie, host a workshop for a client’s HR team. While moving a heavy box of materials into a conference room to set up for the workshop, Jamie strains a back muscle.
Jamie lets Carmen know immediately, so she helps him fill out workers compensation paperwork. After an appointment with his doctor, Jamie finds out he needs regular physical therapy and two months of modified work duties.
Estimated Claim: $16,000
Coverage Needed: Workers compensation insurance — covers your state’s workers compensation benefits if your employee is injured on the job, including lost wages, hospital bills, and rehabilitation costs
How HR Consulting Coverage Protects You
While Carmen is an abnormally unlucky consultant, the truth is that any of the above examples can happen to you in the course of doing business.
Doing your best to mitigate risks can help reduce your chances of an accident happening, but there’s no way to reduce them to zero. Having liability insurance is the best way to protect yourself if something goes wrong.
Think of getting insured like wearing your seatbelt. It won’t stop an accident from happening, but it will protect you from serious damage.
Your liability insurance policy can do the same, shielding you from the financial burden of lawsuits, medical costs, and reputational damage in a worst-case scenario.
Why Insurance Canopy for the Best HR Consulting Insurance
Insurance Canopy makes getting HR consulting coverage easier than ever with our 100% online application. Plus, we keep coverage affordable for you, with premiums as low as $21 a month.
Our base liability policy includes the following essential coverages:
With Insurance Canopy, you can also expand your coverage with optional add-ons, including:
Get the perfect policy for your HR consulting business in minutes today — all without ever needing to speak to an agent (unless you want to)!
FAQs About HR Consulting Coverage
Does Professional Liability Cover Employee Disputes?
Professional liability insurance does not cover employee disputes, such as wrongful termination. Those are typically covered by employment practices liability insurance (EPLI), which your clients may have to protect themselves from these suits.
However, professional liability does cover claims related to your professional advice. If you are named in a wrongful termination lawsuit because your advice directly impacted your client’s decision to fire someone, professional liability can cover your legal defense costs.
How Much Does HR Consultant Insurance Cost?
You can get HR consultant insurance for as low as $21 per month from Insurance Canopy.
Can a Solo HR Consultant Face the Same Risks as a Large Firm?
Yes. Regardless of whether you run a firm with employees or are a solo consultant, you’re still at risk for being blamed for a client’s financial loss or being named in a lawsuit.
Does Insurance Replace the Need for Good HR Practices?
No, risk mitigation techniques are still a critical part of keeping your business safe. Insurance is not meant to replace these strategies, but to protect you if an accident occurs in spite of them. Continue to document all interactions with clients, conduct compliance audits, and establish clear contracts to reduce your risks.
JoAnne Hammer | Program Manager
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
