HR Consultant Professional Indemnity Insurance
An HR consultant's advice can be acted upon quickly and can have significant consequences for an employer. Somebody is dismissed, a redundancy process runs, a contract is changed. If the advice was wrong the employer cannot undo it, and the loss is whatever the employment tribunal awards plus the cost of getting there.
That makes the exposure unusually easy to quantify. A tribunal judgment is a number with reasons attached, and where those reasons criticise the process the consultant designed, that may provide a basis for a claim against the consultant.
The boundary with legal advice is the recurring issue. HR consultants advise on employment law every day without being solicitors, which is entirely legitimate, but it means the policy has to be written for that work rather than for generic consultancy, and the engagement has to be clear about what is advice and what is a decision for the employer.
We can advise HR consultancies on professional indemnity written for employment advice, including where consultants sit in on disciplinaries, act as investigators or handle settlement negotiations.
Common claims and risk exposures
The exposures that produce claims in this trade, rather than a generic list.
Advice on a dismissal found unfair
A common claim scenario. A process the consultant designed or approved is held procedurally or substantively unfair, and the client claims the award, the costs and the management time against the consultant who advised it.
Redundancy and consultation failures
Selection criteria, pooling and collective consultation thresholds. A failure here produces multiple claims at once from the same exercise, which is a different scale of problem from a single dismissal.
TUPE and business transfers
Advice on whether a transfer applies, on information and consultation obligations, and on measures taken afterwards. Getting it wrong affects an entire workforce and the liabilities pass with them.
Contracts, policies and handbooks
Documents the client relies on for years. A defective clause, an unenforceable restriction or a policy that does not comply produces claims long after the drafting, often when the client tries to rely on it.
Acting as investigator or attending hearings
Where the consultant runs the investigation or sits in on a disciplinary, they are part of the process rather than advising on it. Allegations of bias or procedural unfairness then attach to them personally.
The cover we arrange
We arrange professional indemnity and related insurance around the services you provide, the clients you work with and the contractual requirements you face. The appropriate cover and limits will depend on your individual activities and the terms available from insurers.
Professional indemnity
Claims arising from negligent employment advice, drafting and process design. The activity wording needs to say employment advice explicitly rather than describing generic consultancy.
- Employment advice and process design
- Contract and policy drafting
- Investigations and hearings
- Defence costs included
Cover for tribunal outcomes
The client's loss is the award and the costs of defending the claim. The policy needs to contemplate that financial loss rather than only physical damage or injury.
- Awards the client has to pay
- The client's legal costs
- Multiple claims from one exercise
- Aggregation wording matters
Your own employment practices
Claims from your own staff about their employment, which is a separate exposure from advising other employers about theirs.
- Claims by your own employees
- Separate from indemnity cover
- Often a D&O extension
- Relevant as soon as you employ
Cyber and data
Employee records, disciplinary files, medical information and payroll data belonging to client organisations. Some of the most sensitive data any consultancy handles.
- Employee and medical records
- Disciplinary and grievance files
- Breach notification
- Ransomware and restoration
Run off
Continuing cover after the consultancy ceases. Contracts and handbooks stay in use, and a tribunal claim about advice given years ago still names the adviser.
- Continues after you cease trading
- Documents stay in use
- Commonly six years
- Arranged before closure
What an underwriter will ask
Having these to hand shortens the process considerably, and usually improves the terms.
- Income split between retained advice, project work, drafting and training
- Whether consultants attend disciplinaries, grievances or investigations
- Whether TUPE and collective redundancy advice is given
- The largest client by headcount, since collective exercises scale with it
- Whether tribunal representation is provided, and by whom
- Whether documents are drafted from templates and how they are kept current
- Qualifications and CIPD membership of the consultants
- Claims and notified circumstances over the last six years
What affects the cost of your insurance?
The main factors insurers consider when assessing the premium.
Client headcount
The main factor, because collective exercises produce claims in proportion to the workforce. A consultancy advising employers with thousands of staff carries a very different exposure from one advising small businesses.
Depth of involvement
Advising is rated below designing the process, which is rated below running the investigation or attending the hearing. The further into the client's decision the consultant goes, the higher the exposure.
TUPE and collective work
Transfers and collective redundancies are rated above day to day advice, because a single error affects every employee involved.
Documentation discipline
Written advice, confirmed in a letter or email each time, is the control that decides these claims. Advice given by phone to a client under pressure is where the trouble starts.
Conditions and exclusions to consider
Terms vary between insurers, so treat these as the questions to ask rather than a description of any one policy.
Guaranteed outcomes
Promising that a dismissal is safe, or that a tribunal claim will not succeed, is a warranty rather than advice. Employment outcomes are never certain and the policy answers advice, not predictions.
The client's own decisions
Where the employer acted against written advice, that record is the defence. It only works where the advice and the reservation were put in writing at the time.
Penalties and uplifts
Some tribunal awards include uplifts and penalties with a punitive character, and cover for those can be restricted. It is worth checking the wording rather than assuming the whole award is recoverable.
Reserved legal activities
Conducting litigation and other reserved activities are for authorised persons. A consultancy straying into them is outside both its policy and the regulatory framework.
Common questions
A client lost a tribunal claim after following our advice. Are we liable?
Possibly, and the tribunal's own reasons will usually tell you. Where the judgment criticises the process you designed, the client has a clear route to you. Where it turns on evidence or a decision the employer made themselves, you are in a much stronger position, which is why written advice matters so much in this work.
We are not solicitors. Can we advise on employment law?
Yes for advice and process, no for reserved legal activities such as conducting litigation. The important part is that your policy is written for employment advice specifically, because a generic consultancy wording may not contemplate the tribunal awards that are the actual loss.
Should we sit in on disciplinary hearings?
Many consultancies do, and it needs declaring because it changes the exposure. Once you are in the room you are part of the process, so allegations of bias or unfairness attach to you rather than only to the employer, and that is rated differently from advising beforehand.
What limit do HR consultants need?
Base it on your largest client's headcount rather than your fees. A single unfair dismissal is a modest claim, but a redundancy exercise across a few hundred staff that was consulted on incorrectly produces many claims from one piece of advice.
How do I get a quote from True Risk Solutions?
Call 01304 262880 and speak to a broker, or email info@truerisksolutions.co.uk with what you do, what you need cover for and a phone number with the best time to call, and a broker will call you back. We need a phone number to quote, because the cover and the price depend on questions that are quicker to answer on a call than by email.
Speak to a specialist who understands your industry
Tell us about your business and the work you undertake, and we will come back to you with cover options built around it. Call 01304 262880, or email us with a phone number and the best time to call and a broker will ring you back.