Recruitment Professional Indemnity Insurance
Why do you need it?
You need Professional Indemnity insurance to cover you in respect of any civil liability Claims for damages or compensation that are made against you during the Period of Insurance, by any of your clients or any other third party, arising from any actual or alleged breach of professional duty owed in the conduct of your Professional Business.
With respect to any such claim, you need to be covered against:
- the payment of damages or compensation awarded against you.
- claimant’s costs and expenses that are awarded against or recoverable from you.
- defence costs incurred by you or on your behalf with the insurer’s prior written consent.
Even where the allegation that you have breached your professional duty is unfounded, your Professional Indemnity insurance would still cover you for defence costs that are incurred by you or on your behalf in defending the allegation that is made against you.
The allegation of a breach of professional duty can be made not just against you or your immediate employees but can often be made against your On-Hired Employees or On-Hired Contractors.
How can liability arise?
The sources of risk can include, but are not limited to:
- Failure to adequately check references and qualifications.
- Breach of confidentiality.
- Loss of documents (including computer records and electronic data material).
- Placing individuals in a position to which they are not suited, or have inadequate experience.
- Failure to ensure adequate workplace health and safety procedures are in place at the Host Employer's premises or work site.
- Inappropriate training and supervision of support staff.
- Inappropriate advice relating to staff recruitment, workplace policies and procedures.
- Failure to act in accordance with client instructions.
- Acting outside the professional's roles and responsibilities.
- Unethical behaviour.
- Vicarious liability arising out of the actual or alleged acts, errors or omissions of your immediate employees, On-Hired Employees or On-Hired Contractors.
What is vicarious liability?
Here we are concerned with situations where you as an employer may be held vicariously liable to your clients or any other third parties for the actual or alleged acts, errors or omissions of your:
- immediate employees in the course of their employment with you.
- On-Hired Employees and/or On-Hired Contractors while they are on-hired by you to Host Employers to work in temporary placements in workplaces or at worksites.
Furthermore, in your capacity as a principal you may be held vicariously liable to your clients or any other third parties for the actual or alleged acts, errors or omissions of any of your consultants or agents while they undertaking work on your behalf in connection with your Professional Business.
What are the key covers to look for?
- Cover for all your activities including training and induction, payroll management and any other activities you may undertake.
- Cover for permanent and on-hired placements, as well as independent contractors.
- Cover for all white collar On-Hired Employees and white collar On-Hired Contractors regardless of their activity.
- Cover for all blue-collar On-Hired Employees and blue-collar On-Hired Contractors regardless of their activity.
- Cover for all occupations and industries you work with including nursing, hospitality, accounting, engineering, labourers, mining, construction, etc.
- Cover for bodily injury and property damage as often this is excluded in order to reduce the premium.
For insurance purposes:
- The term ‘blue-collar On-Hired Employee’ refers to any Employee of the recruitment agency who is an unskilled manual labourer or unqualified tradesperson and who is on-hired, on a temporary basis, by the recruitment agency to any Host Employer.
- The term ‘blue-collar On-Hired Contractor’ refers to any person who is contracted to the recruitment agency under a contract for services and who is an unskilled manual labourer or unqualified tradesperson, but only whilst on-hired, on a temporary basis, by the recruitment agency to any Host Employer.
What are the common pitfalls?
Some Professional Indemnity insurance policies may:
- exclude legal liability arising out of the acts, errors or omissions of your On-Hired Employees and On-Hired Contractors.
- exclude any legal liability that you incur after you have placed a candidate in a role.
- exclude certain occupations - such as: blue-collar, engineering and nursing.
- only provide limited cover in respect of your On-Hired Employees and On-Hired Contractors by making it a requirement of the cover that they hold tertiary qualifications, or by imposing a lower Limit of Liability or a higher Excess with respect to such cover.
What Extensions need to be included in your Professional Indemnity insurance policy?
Your Professional Indemnity insurance policy should include, among other things, the following extensions of cover:-
- unintentional Defamation.
- Continuous Cover.
- unintentional infringement of Intellectual Property Rights.
- unintentional Breach of Confidentiality.
- Dishonest, Fraudulent, Malicious or Criminal (Innocent Party Cover).
- Official Investigations and Inquiries.
- Loss of Documents.
- unintentional breaches of the consumer protection provisions of the Australian Consumer Law or any other similar legislation enacted by the States and Territories of the Commonwealth of Australia or by the Dominion of New Zealand.
- Automatic Reinstatement of the Limit of Liability.
- Consultants and Agents (covering your vicarious liability).
- Joint Ventures - covering your proportion of any legal liability arising out of your participation in any joint venture in the conduct of your Professional Business.
- Newly Acquired or Created Subsidiary Companies.
- Severability and Non-Imputation.
- Court Attendance Costs.
- Public Relations Expenses.
- Previous Business.
- On-Hired Employees (covering your vicarious liability).
- On-Hired Contractors (covering your vicarious liability).
- Cover for On-Hired Contractors themselves (Subject to negotiation).
- On-Hired Medical Services:
- covering your vicarious liability, but not the individual liability of any Medical Practitioner/Midwife who performs the On-Hired Medical Services (they are required to effect their own Medical Malpractice insurance cover). Good Samaritan Acts.
What are some typical Claims Examples?
Example 1 - a member of your staff fails to perform a proper qualification for a permanent placement. You place the candidate, who is not sufficiently qualified for that permanent placement. The candidate makes a mistake and your client incurs a financial loss due to the mistake. The client may have a cause of action against you for your failure to perform a proper check on the candidate - this loss scenario should be covered by your policy.
Example 2 - you place five data input workers on a temporary assignment and fail to train one of your employees correctly. At the end of the contract period your client identifies an error in the data processed by the poorly trained employee and the whole task has to be repeated - this loss scenario should be covered by your policy.
Example 3 - your client alleges one of your temporary workers has stolen from them, you incur significant legal costs in defending this action - this loss scenario should be covered by your policy.