Professional Indemnity Insurance- When will it protect your Recruitment Agency from a costly claim?


As a recruitment agency director, you have plenty of costs to think about- staff, offices, advertising- so taking out expensive insurance policies is unlikely to be your top priority. Today I will be outlining some common claims that can arise against recruitment agencies and can be costly to remedy. However, all of these claims have one thing in common - the agency would have been protected had they taken out adequate Professional Indemnity insurance.

What is Professional Indemnity Insurance?

Professional Indemnity insurance should be considered by any business which provides advice or other professional services, such as recruitment. This type of insurance protects the business if faulty or negligent advice or services are given, causing the Client a financial loss. Whilst you should always read the specific wording of your policy documents, Professional Indemnity insurance will often cover the claim for compensation plus the costs of defending or settling the claim.

Types of Claims

A common claim is where a recruitment agency has been accused by their client of not checking a Candidate’s references thoroughly, or misrepresenting their experiences or qualifications in order to secure a deal. If the Candidate does not work out for the Client as planned, they may claim that the Candidate had been misrepresented, claiming the full cost of re-recruitment, plus other expenses incurred. Whilst every effort should be made to present the Candidate in as true a light as possible, where a misrepresentation has occurred a recruitment agency is protected financially by taking out Professional Indemnity insurance (though this won’t protect their reputation!)

Vicarious Liability….
… which essentially means that one party is responsible for the actions of another. Sometimes recruitment agencies can be deemed ‘the employer’ of temporary workers and thus responsible for their actions, and in particular their negligent acts. You can’t predict when a Candidate will lose focus but should they do something wrong, Professional Indemnity insurance will give you peace of mind that there will be no financial loss to the business.

Imagine you were to include a case study about a former Client in a piece for a recruitment magazine and soon after that Client makes a claim against you for defamation, alleging that you made a false statement about them and demanding compensation. A claim on your Professional Indemnity insurance would cover any compensation due to them.
At TBOS we know recruitment agencies inside out and encourage our Clients to take out the policies relevant to them. For further information on TBOS services, please call us on 0845 881 1112.

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