Insurance for IT Contractors

FredQ

Can anyone recommend a company for insurance for IT contractors? There are a few old threads here that touch on this but many of the links are dead.

Basically, I'm looking for coverage in the event of being sued by an agency or client, to cover legal fees and possible payouts and such.

14ned

If you're a limited company, do all business through that limited company, and the contract doesn't require it, you shouldn't get contracting insurance. It makes no sense under the Irish tax system to do so and is a waste of money.

Niall

John_Mc

Only get it if the contract you're about to sign requires it. I contracted with a government agency and needed to have indemnity insurance of €13.5m. Ridiculous and it cost about €1200 a year.

As soon as my contract finished I cancelled the policy. I have not required it in any other non-government contracts.

14ned

John_Mc wrote: »

Only get it if the contract you're about to sign requires it. I contracted with a government agency and needed to have indemnity insurance of €13.5m. Ridiculous and it cost about €1200 a year.

That's a crazy amount of insurance for a single contractor to have to take out. I was chafing at the €1m required by this contract, but €13.5m is taking the p*ss.

The premium isn't awful for the amount though. As https://www.boards.ie/vbulletin/showthread.php?p=105202993 recounts, I picked up €1.3m for €208. So multiplying by ten, you actually got a very good premium considering.

Niall

John_Mc

Yeah I know, my friend is an insurance broker and I went through the place he worked for at the time and he said it to me then that it was a very high requirement for insurance.

There was public and employer liability and professional indemnity lumped in together. One was for €13.5m and the other 2 for only a cool €6.5m each .

Absolutely ridiculous for a one man show private limited company but required by all government contracts I think. Between that and the PSWT it's just not worth it unless you're huge and have loads of bums on seats

FredQ

14ned wrote: »

If you're a limited company, do all business through that limited company, and the contract doesn't require it, you shouldn't get contracting insurance. It makes no sense under the Irish tax system to do so and is a waste of money.

Niall

Why would that be? If you get sued for a breach of contract or something else, won't there be a lot of legal fees apart from any claim?

John_Mc wrote: »

Only get it if the contract you're about to sign requires it. I contracted with a government agency and needed to have indemnity insurance of €13.5m. Ridiculous and it cost about €1200 a year.

As soon as my contract finished I cancelled the policy. I have not required it in any other non-government contracts.

Same question really. Are you guys thinking that if you get sued you simply close up the company and it all goes away?

John_Mc

FredQ wrote: »

Same question really. Are you guys thinking that if you get sued you simply close up the company and it all goes away?

Well, yes, that's the way private limited companies work. You aren't personally liable so if the proverbial hits the fan you can wind it up and start again.

Realistically though, who's going to sue a self employed contractor?

14ned

FredQ wrote: »

Why would that be? If you get sued for a breach of contract or something else, won't there be a lot of legal fees apart from any claim?

Same question really. Are you guys thinking that if you get sued you simply close up the company and it all goes away?

Under Irish tax law, there is a close company surcharge on any funds held within a closely held company such as the ones almost all contractors will have. This makes retaining funds in the company highly tax inefficient, which is exactly what Revenue wants. They want it all paid out in the year of earning it, irrespective that many contractors oscillate between fat years and lean years.

As a result, Irish contractors have essentially asset free limited liability companies. If somebody goes to sue one of us, any competent legal advisor will advise them that there are no assets to get in the case of winning, and indeed not even legal fees would be paid. The legal advice would be to not bother.

I've been contracting nearly a decade now, and know lots of contractors. I've never heard of an Irish IT contractor being sued because there is no point in doing so. This is also why some clients insist on insurance being held, because it gives them something to sue.

But really, unless you are contractually obligated to do so, PI insurance is a waste of money in Ireland.

Niall

14ned

John_Mc wrote: »

Well, yes, that's the way private limited companies work. You aren't personally liable so if the proverbial hits the fan you can wind it up and start again.

Technically actually no. If someone did sue your contracting company and won, it would become bankrupt as it has no money to pay out. You as a Director would be automatically disbarred from being a Director for any other company for five years.

The usual way round this is to appoint your wife/cousin/sister/father/whatever as Director of your next company. An alternative is to petition the court for a stay on the disbarment, but that is expensive and non-trivial to get.

Niall

JackieChan

John_Mc wrote: »

Only get it if the contract you're about to sign requires it. I contracted with a government agency and needed to have indemnity insurance of €13.5m. Ridiculous and it cost about €1200 a year.

As soon as my contract finished I cancelled the policy. I have not required it in any other non-government contracts.

John, was this a requirement from your agency? I'm assuming you're not been paid directly by the gov department?
My agency under the guise of GDPR have made it mandatory for contractors to have insurance in place.

Jim2007

John_Mc wrote: »

Well, yes, that's the way private limited companies work. You aren't personally liable so if the proverbial hits the fan you can wind it up and start again.

Well as a former insolvency practitioner I can tell you that this is not true. Creditors can seek to have the vail of incorporation lifted if you behave negligently and without due regard for the consequences of your actions. Furthermore in such circumstances it is very unlikely that you will be allowed to go on to hold a directorship in a new company.

Jim2007

FredQ wrote: »

Basically, I'm looking for coverage in the event of being sued by an agency or client, to cover legal fees and possible payouts and such.

While I understand your concern, the reality is that in 30+ years contracting I have never heard of a contractor being sued. It is not that they could not do it, it is that it would not make much since to do so. If the loss is so great that it is worth their while considering legal action then it is also unlikely that you have sufficient assets for them to recover it from you.

So unless it is a requirement of the contract you are signing up to, I would not worry about it.

John_Mc

JackieChan wrote: »

John, was this a requirement from your agency? I'm assuming you're not been paid directly by the gov department?
My agency under the guise of GDPR have made it mandatory for contractors to have insurance in place.

No I wasn't going through an agency, I was working direct for a government agency having won a tender for work.

I've not heard of a recruitment agency forcing their contractors to have insurance in place.

Jim2007 wrote: »

Well as a former insolvency practitioner I can tell you that this is not true. Creditors can seek to have the vail of incorporation lifted if you behave negligently and without due regard for the consequences of your actions. Furthermore in such circumstances it is very unlikely that you will be allowed to go on to hold a directorship in a new company.

That's interesting and good to know. Thanks

14ned

Jim2007 wrote: »

Well as a former insolvency practitioner I can tell you that this is not true. Creditors can seek to have the vail of incorporation lifted if you behave negligently and without due regard for the consequences of your actions. Furthermore in such circumstances it is very unlikely that you will be allowed to go on to hold a directorship in a new company.

Although true, this is a very high bar to reach for an IT contractor where it is extremely hard to find obvious evidence of gross malpractice or negligence in the production of software for a given specification under contract. For the kind of small change contracts which individual contractors do, it's not worth the legal costs and effort unless the contractor was behaving fraudulently or illegally, and then it's a criminal matter in any case.

Don't get me wrong here: I wish there was a more formal standard of what is considered quality work. It would eliminate my lower cost competition. But I haven't seen much movement in that direction in the industry. Clients seem to want work of variable quality with little recourse on the provider for shoddy work.

Niall

moycullen14

John_Mc wrote: »

Well, yes, that's the way private limited companies work. You aren't personally liable so if the proverbial hits the fan you can wind it up and start again.

Realistically though, who's going to sue a self employed contractor?

Someone who knows he has €13.5 million liability insurance. To me, a large insurance policy is just painting a target on your back. ned14 is correct, go through a limited company, keep the assets as low as possible and do not insure.

John_Mc

moycullen14 wrote: »

Someone who knows he has €13.5 million liability insurance. To me, a large insurance policy is just painting a target on your back. ned14 is correct, go through a limited company, keep the assets as low as possible and do not insure.

As I said, I was/am private limited but the conract was for a government agency I won a tender for and they insisted on it on that level of cover.

I wasn't sued by the way

srsly78

My updated contract also has this clause added. But then again they also have other stuff I ignore like 'work will be free from defects of any kind'. Another amusing one is the 'will not use any open-source software' clause.

14ned

srsly78 wrote: »

Another amusing one is the 'will not use any open-source software' clause.

That latter one is actually enforceable though. There is software used to comb through other software looking for copyright suspicious fragments. We have received a number of list of fragments in the Boost C++ Libraries which we were told were theft from some corporation X. Upon pulling out the commit history, it is easy to prove it's the other way round.

Most of the use of Boost is for people cloning Boost facilities into their corporate provider. Usually badly. Corporations get what they contract, and exactly what they deserve for stupid conditions like the above.

Niall