In episode 7 of Unsure? Insure! we look at what happened when a freelancer's client asked them to pay the company damages after missing deadlines.
This freelancer's client asked them to submit the work they’d completed for a project that had missed various deadlines, and then asked the freelancer to pay the company damages for the work being overdue.
I’ll highlight what this freelancer could have done differently to have a better outcome, and the role insurance would play in this situation… if they had been insured.
“I’ve been working with this client for 6 months. The brief they gave me has drastically changed. It quickly turned out to be much more work than I originally quoted for as it was technically more complicated. This means the project is now clocking in at double the hours I quoted.
I’ve lost clients due to giving this project more time than expected. Deadlines were missed due to my focus being taken by features that weren't initially planned, shifting deadlines and deliverables not being provided. This has lead to a breakdown in my relationship with the client.
This evening my client has emailed me asking for work to be submitted, but also demanding damages be paid to their company as a result of missing deadlines. What am I supposed to do in this situation?”
What we’re looking at here is:
- A project being delayed due to poor management and underestimating the work involved
- The client relationship breaking down due to milestones being missed, irrespective of whose fault that is
- A claim for the freelancer to pay damages to the company
This situation is why professional indemnity insurance exists, but let’s back up a bit.
Don't Underestimate A Solid Project Scope
The workload turned out to be more than the freelancer originally quoted for because the work itself was technically more complex and more features were added as the project progressed. We’ve spoken about the need for a solid project scope in the past.
When you’re quoting for projects, it’s crucial the discovery phase helps you put a solid project scope in place and you leave a generous estimate for project timeframes. It’s important to communicate with your client what happens when project scopes change. For example, the budget and timeframe for milestones will need to be re-evaluated.
Here’s what With Jack customer, photographer and designer Dan Rubin, has to say about putting together a solid project scope.
"It's so important to work with any potential client to fully understand their requirements, and to help them understand how those requirements relate to your estimation of the work involved to provide your services.
Part of the work you do with a new client — before drawing up a quote and a contract — is to make sure there are no hidden requirements or misunderstandings, and to discover as much detail in advance as possible.
Before a project starts is the easiest and best time to make sure your client understands that they're agreeing to the specific scope, as well as the budget, and that those two things are directly connected. If it isn't written in the scope you've presented, it doesn't exist.
I always make sure that those details of any proposal or contract are clear and detailed, and that my clients understand that any changes to the scope — schedule, deliverables, alternate concepts, etc — will change the cost of the project.
I also have them agree to that in writing, by including a specific clause in the contract that requires the client to initial that section before a project goes ahead."
As Dan said, it’s the freelancer’s job to understand what the client’s requirements are and to discover as much detail in advance. This is to make sure there’s no ambiguity with what work is to be expected and when it’s to be expected by. Any changes there after require the budget, scope and timeframe to be re-evaluated accordingly.
The Client Relationship Has Broken Down
In this situation, we’re beyond that point and the relationship has already broken down due to milestones being missed. Because of this there’s now a claim for the freelancer to pay damages.
This is the most common scenario we see at With Jack. Professional indemnity claims usually arise from client relationships gradually breaking down. This is exactly why you should have insurance.
If the client is saying, “We’re 3 months behind where we thought we’d be, we estimate we’ve lost out on £30,000 of income and we’re invoicing you for that amount”, this would be picked up by your insurer under your professional indemnity insurance. The insurer would try to negotiate with your client, but they pay for and provide the legal experts to do so.
In this particular instance, the client hasn’t said anything as specific as that. They’ve just said “damages” have to be paid, but the same premise applies.
The insurer would communicate with the client to reach an agreement, and the costs of that legal process and the agreed figure would be covered under the professional indemnity policy.
To recap, what should you do if your client wants you to finish the project and asks for damages?
- Work with your client to discover as much detail in advance and make sure there are no misunderstandings
- Make sure your client understands that they're agreeing to the scope as well as the budget, and that those two things are connected
- It’s your job to ensure your client understands that any updates to the scope will change the cost of the project
- Have your client agree to these terms in writing by including a clause in the contract
- If things do progress to the point your client is asking you to pay damages to the company, your professional indemnity insurance will help. The insurer will negotiate with your client to reach an agreement, and the cost of this negotiation process—as well as the damages—will be covered by the insurer