Do Recruitment Agencies need Professional Indemnity insurance?

Whenever you offer your knowledge, skills and advice as a recruitment professional – whether self-employed or for a company – there is the potential for a compensation claim. If your client believes that the service you provided has led to financial loss or reputational damage, they can take legal action against you or your agency/consultancy.

Even when you clear and complete briefs from your client, things can still go wrong with the candidates that you place and financial or reputational loss can result in a claim.

Three common complaints that can lead to professional indemnity claims for recruitment consultants include:

The Unsuitable Candidate

This type of claim is particularly abundant with temporary placements where it may be your responsibility to vet the candidate before they are placed and any subsequent issues can be claimed as a failure of your vetting.

The Misrepresented Candidate

Another area that involves your responsibility to vet a candidate; if you place a candidate under certain circumstances, such as the understanding that they have certain qualifications or certifications and this is found to be untrue, any damages from this may be sought from you, leading to a professional indemnity claim.

The Damned Data

In the fast-paced and digital world that we live in, data management is a key skill that you must possess. If you send the wrong CV to the wrong person, release private client or candidate information or lose a client briefing that contains confidential data, you are liable for the damages that may arise.

The Process

The process behind a professional indemnity claim is simple. Take The Misrepresented Candidate as an example…

You placed a candidate, Dave, who had a forklift certificate. Shortly after Dave was placed, his forklift collided with a boiler! Upon investigation, the client finds that Dave does not have a forklift certificate.

In this instance, no reputational damage has been caused but there has been financial loss. The client contacts you, explains the situation and says that they are holding you liable for the cost of replacing the boiler. At this stage you contact the insurers that provide your professional indemnity cover and they decide whether or not to pay your claim.

Whilst this is a simple example, it highlights the process for a professional indemnity claim for recruitment agencies. Click here to find out more about RecruiterCover insurance.