Not all projects will run smoothly and not every client will be a dream to work with. Professional indemnity insurance is designed to help you navigate problem clients and difficult projects if they lead to a threat of legal action or a client recovering damages.
With developers this is mostly due to technical bugs and project management issues, but insurance also helps if there are arguments around intellectual property.
Below are some interesting facts for web developers considering insurance:
- Most claims involve an accusation of breach of contract. A lot of freelancers mistakenly assume having a contract resolves them of liability, but if there’s a breach the client can bring a claim against you
- Breach of contract claims often stem from the late delivery of a project where the client can show the loss they’ve sustained due to work being delivered late
- A quarter of claims involving web developers were negligence based. From our data this is usually a bug in the code that’s had expensive consequences, but many of these negligence claims can arise from the client perceiving you to be at fault… even if you aren’t
- Not all claims result in damages being awarded to the client, but all claims have a cost. The legal fees in the defence of a claim can quickly add up and this is where insurance is at its most valuable because defence costs are included in your policy
It’s not surprising that many disputes are accompanied with non-payment. If a client is unhappy with the developer’s work, they are unlikely to pay for it. This is why the professional indemnity’s mitigation cost clause is so important for developers. We’ll go into this in more detail in the next section.
Here are just some of the features of the professional indemnity policy that web developers could find useful:
Breach of contract
A lot of developers mistakenly assume they don’t need insurance if they have a contract, but what happens if you accidentally breach the terms of your contract? If your client complains work wasn’t completed or delivered to spec they can make an argument that you’ve breached your contract. As mentioned earlier, most claims against web developers involve a breach of contract.
Negligence
Considering technical issues with code is one of the most common causes of claims against developers, the negligence clause in your professional indemnity policy could come in handy. Bugs are an inevitable part of software development, but a mistake in your work (or a client perceiving you to have made a mistake) can lead to a client suffering financially and trying to recover that loss from you.
Intellectual property
The intellectual property infringement clause can settle disputes around ownership of code. Cover also extends to misappropriation of ideas under implied contract and unfair competition. Who owns the IP is usually outlined in the contract, but we have seen instances where an argument has arisen around rights.
Mitigation costs (unpaid invoices)
If your relationship with a client breaks down or they feel you haven’t delivered work to spec, the client may refuse to pay any or all of your fees. The mitigation costs clause means that if your client refuses to pay your invoice and accompanies their refusal with a threat, the insurer will pay you the money owed to you if they believe it will avoid a claim for a greater amount.
One of the best pieces of advice we can give to freelance web developers is to write a solid statement of work. This ensures the client can’t shift the goalposts throughout the project and means they know exactly what to expect. Unfortunately a lot of the claims involving software we see at With Jack involve scope creep.
A web developer was hired to build an application for a client. After demoing the completed app, the client queried why it was missing functionality. The developer explained they’d built it to spec. Whilst they could build the extra functionality the budget would need to be revised to accommodate the additional work.
The client reacted angrily to this (this is why it’s useful having written terms and a project spec. You can simply refer back to it to show what was agreed to in black and white). They accused the developer of not completing the work that was expected and refused to pay the invoice. What triggered the web developer’s insurance was the threat to involve solicitors if the developer didn’t complete the rest of the work.
The insurer appointed legal experts to negotiate with the client with the aim of harmoniously ending the project and getting the developer’s invoice paid. When it became clear the client wasn’t going to be reasonable, the insurer covered the developer’s invoice under the mitigation costs clause on the basis the client wouldn’t pursue anything further and would consider the project finished.
By now you should have a better understanding of how insurance can help you with common risks web developers face, but how much is it going to cost? With Jack can arrange £1,000,000 of professional indemnity insurance for web developers from £14 per month if your turnover is below £250,000.
Just a heads up that there will be additional costs if you add other products to your policy, turn over more than £250,000 or opt to extend the jurisdiction to include US cover.
There are lots of benefits to being insured:
- It removes the pain of sourcing the right lawyer should you find yourself in a legal dispute
- You won’t have to pay expensive, upfront fees for a consultation
- You won’t face situations alone. Whilst freelancers are one-person businesses, being insured means you have a team of experts behind you
- Insurance is tax deductible
Web developers have a duty of care to clients. You’re responsible for delivering work on time and to a high standard. You’re responsible for working with your client to achieve their goals. You’re responsible for communicating effectively and efficiently.
Being insured not only puts you in a better position to fix a wrong, but it gives clients confidence that they’re working with a professional.
We’ve talked about what features insurance has that can help you, real stories from freelancers that have had to use their insurance and how much it costs. It’s now over to you to take the next step and get a quote.
