You may take out several insurance policies without a second thought, but you probably hope to never have to use any of them. No matter what line of work you’re in though, the possibility of a negligence allegation, or other type of adversity is one that is always present. Unfortunate incidents can occur without any notice, and it’s near impossible to predict exactly what might go wrong. Understanding some of the common risks in your industry can be an effective way to be prepared, take a proactive approach to your risk management and safeguard your business’s financial livelihood. Here are 4 common risks we’ve seen from small businesses, and how insurance may help in each instance.

If your business holds confidential data of any sort, breach of confidentiality is a risk that can have significant consequences. Examples include accidentally sending an email to the wrong person; receiving an allegation as a result of sharing information without consent. Allegations of a breach of confidentiality can escalate quickly, resulting not only in expensive legal fees but also in some cases settlements to the complainant. Improper handling of sensitive personal information or financial information can lead to serious legal consequences and loss of patient/client trust. Breaches of personal information may also come about as a result of cyber attacks.

Robust record keeping practices and documentation, strict adherence to privacy policies and obtaining clear consent and letters of engagement from all relevant parties involved (such as both parental guardians if the client is a child) are some of the ways to mitigate potential confidentiality breaches. Confidentiality breaches can look different and manifest differently based on your industry, however there is typically a clear line in the sand when it comes to insurance cover and policy response.

The policy which may provide insurance cover for legal action taken against you as a result of breach of confidentiality may vary based on how the breach occurs. If you find your business facing an allegation of breach of confidentiality, Professional Indemnity (PI) Insurance may provide cover if the breach was due to professional negligence or an error by you or your employee. In this instance, PI may provide cover for the legal costs, as well as compensation you might be required to pay. However, if personal information was to be compromised as a result of a cyber event or attack, then a separate Cyber Insurance policy may be required. That’s why if your business has a digital footprint, Cyber Insurance may be an important cover to consider. As a professional advice/service based business, while it might be tempting to think your PI Insurance provides all the cover you need, additional forms of insurance may need to be considered depending on the way your business operates.

Here is an example of a claim of an Aon client who was subject to a confidentiality breach allegation, and how insurance helped alleviate the financial consequences of the allegation:

Mary**, was a psychologist who worked at a school. She fell subject to a confidentiality breach allegation when she shared some confidential information about a student with the school. As a result she was required to respond to the regulatory body in response to the allegation. Legal fees of up to $3,500 were incurred in drafting the response to the regulatory body. Mary held Professional Indemnity Insurance through Aon, and her insurance covered the cost of these legal fees.

Professional misconduct can erode trust and credibility in your services, which can impede your business’s growth in the long term. Again, professional misconduct can take many forms depending on the industry you operate in. For accountants, it can include actions such as providing incorrect advice; failure to execute an agreed service, not meeting a deadline, making an error on documents, and fidelity loss. For health professionals however, it can include bias, crossing professional boundaries, not adhering to social media guidelines, providing incorrect advice, or injury as a result of a professional service. These types of professional actions/allegations may be covered under a Professional Indemnity Insurance policy, however, how well the appointed lawyer is able to defend your claim will be impacted by the service, advice and engagement your business is able to substantiate.

The detail behind each allegation can vary, and in some cases, there are multiple allegations within the one claim. Regardless of the circumstances surrounding the claim, the requirement of evidence to support your decision making and recommendations when a claim or complaint is made is of utmost importance. Whether its clinical notes, general notes/records of interactions, research documentation, consent forms and letters of engagement, without these records the insured will not only lack credibility they will also have very little to support their legal defence in the event of a claim.

Bill** was an accountant who provided tax advice to a variety of clients. He received a notification from a client he’d worked for many years ago alleging that he’d provided incorrect tax advice. The client was taking legal action against Bill, seeking damages of over $30,000. Bill incurred significant legal costs in forming his defence in this legal matter. Because he had Professional Indemnity Insurance, his legal fees, as well as the damages he was awarded to pay were covered under his insurance.

Slips and falls, damage to your clients’ property or injury as a result of your products, are incidents which may not occur that often, but if they do occur, can have significant financial consequences from the resulting legal action. Even if your business doesn’t manufacture or sell products, these may still be incidental risk from simple actions like you gifting or providing a product. Remember to also consider your client base when reviewing the likelihood of slips and falls occurring on your premises, as some clients may be more vulnerable to slips and falls occurring.

Ensuring your business has Public & Products Liability insurance arranged to cover these types of incidents is therefore an important part of protecting your business’s financial livelihood in the event of unfortunate incidents such as slips & falls and property damage.

Here are some of the ways slips and falls can occur:

• Unsecured flooring like mats, slippery floors and uneven steps, or other tripping hazards such as electrical cords.
• Pathways leading into your business premises that have debris / holes or cracks or other hazards.

If your business uses digital systems to manage sensitive information such as patient and client data which may include health and financial records, you will need to think about your business’s susceptibility to cyber crime and cyber attacks.

Some of the commonly faced cyber threats faced by small business include: ***

• ransomware – a type of malicious software that encrypts a victim’s data and computer systems preventing access until a payment or ransom is paid to restore access to the victim. Another method hackers may use is just to steal sensitive data and threaten to release it online unless a ransom is paid.
• theft of funds – involves a criminal hacking into a business’s online banking account or using social engineering techniques to trick employees to send money to the hacker.
• data breaches –hacker stealing data and selling it to the dark web.

The financial implications of a cyber attack can be substantial. For example, according to CFC data, although ransomware only accounted for 16% of claims notifications, it comprised 71% of total claims paid. These ransomware payments aren’t just the extortion demands, but also the associated costs with system damage and rebuild, business interruption, incident response and forensic costs and notification for data breaches.***

Cyber insurance may play a crucial role in providing financial protection and assist professionals in responding effectively to cyber incidents.

When you run your own business, you’re likely to focus on bringing in as much business through the door as you possibly can. Understanding common risks in your industry, and how to help protect your business against them is a worthwhile exercise for any business owner regardless of the industry you operate in. Unfortunate incidents can happen to even the most cautious business owner, and the resulting financial strain can be significant. Having appropriate insurance in place to help protect your business is an important part of risk management.