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Top 8 Recruitment Consultants Professional Indemnity Claims

April 15, 2019
Recruitment
4 min read

When you are insuring a house or car, it is easy to understand the potential claims which could occur.

However, when dealing with complicated cover such as professional indemnity, it can be more challenging to visualise some of the significant risks faced by Recruitment Consultants and Headhunters.  

Our eight claims examples should help bring things to life.

#1 Unsuitable Candidate claims

Even with the tightest of briefs and terms of business, client disputes can still occur when things go wrong, and they incur cost because the candidate was deemed unsuitable after starting employment.

PI Insurance claims are more prevalent in this area when dealing with temporary placements as there is more onus on the recruitment consultant to vet and manage suitability.

Still, equally, we have seen significant examples for permanent placements whereby a headhunter has made verbal or written comments around suitability which are later challenged.

#2 Candidate Misrepresentation

Not too dissimilar to unsuitability, misrepresentation claims are more cut and dried.  Typically challenges will revolve around missing qualifications or skills which were claimed before placement and can no longer be proved or do not exist.

In some circumstances, this may result in the candidate no longer being able to carry out the role, as such, the employer may withhold their fee and look to the recruitment agency to reimburse their costs.

#3 Temporary Staff Claims / Vicarious Liability Claims

Vicarious Liability provides cover in situations whereby you could be held liable for the actions of others, i.e. being held responsible for the actions of staff which you have placed.

For example, you place a temporary IT contractor into a data warehousing business, during their first morning they are found to be negligent when a significant client data file is lost and now needs to be recovered at considerable expense.

The employer holds you responsible as they feel the candidate did not have the right skills for the role and that you are vicariously liable for their loss.

#4 Breach of Duty of Care

The law dictates that, as a professional recruiter or headhunter, you owe your clients an enhanced duty of care.

Where your advice or services does not meet client expectations and a physical or financial loss is incurred, they may try to make a claim against your recruitment consultants professional indemnity insurance.

The key to avoiding such losses is to be very clear about expectations from the outset.

This may sound simple, but writing a solid brief for your team could be the best way of keeping yourself out-of-court and avoiding legal challenges.

For example, an eager Headhunter promises their client that they have a host of potential hires for a role and also confirms a salary expectation.

Based on the advice, the client takes on a new contract with a fixed completion date and budgets for the suggested salary range.

However, the headhunter cannot find a suitable candidate for that salary and instead presents one for nearly double that.

The client claims professional negligence and wants the headhunter to compensate for the shortfall in pay as well as any contractual penalties.

#5 Intellectual Property / Breach of Copyright

In today’s digital world, it is easy to accidentally use an image or logo without permission.

Whether it be a photo for an online brochure or a new member of staff “borrowing” a job template from a previous employer, IP breaches can be costly but are becoming all too common.

#6 Loss of Data / Documents

It seems almost weekly that a company is in the news for loss of client data.  This can be as simple as leaving a laptop in a wine bar containing a list of candidates, to an online data breach.

Security protection must be top of mind at all times, and appropriate risk assessments are carried out.

#7 Drivers Negligence

If you are involved in placement or recruitment of driving professionals,  then you are probably aware of the enhanced risk should they incur a motor claim and are found to be negligent.

By nature of the title, you are providing a “professional” driver, therefore, should they drive a high-sided truck into a filling station or reverse into a bollard, you could be held liable.

#8 Breach of Confidence

While one Headhunter client described it as stupidity cover, PI claims for breach of confidence are also relatively frequent.  Professional confidence is vital for any recruitment consultant.

It is easy for a breach to occur in a busy environment.  Whether it be an emailed CV to the current employer by mistake or being overheard discussing opportunities with a colleague in a coffee shop, such instances can, and frequently do, result in expensive professional indemnity losses.

Next Steps

As Stephen Covey said, “seek first to understand, then be understood”. While some recruitment consultants PI insurance claims can be avoided by simple process checks, the most important lesson is to ensure that both you and your client, really understand the services being provided by each contract and placement.

This should minimise the possibility of surprise claims, whereby you believe you have done a fantastic job, only to find that your client is seeking financial recompense and will not pay your fee!

FREE Business Insurance and Professional Indemnity Review

Insync are specialists in Recruitment Consultants and Headhunters Professional Indemnity Insurance, and we appreciate that every recruiting business is different.  As such, you may want to take advantage of our FREE Business Insurance review service.  You can book a slot that suits YOUR diary via our website, or call one of our team on 010 409 4015.


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