Freelancers and service providers from the IT, media or consulting sector bear high risks when they conclude framework and project contracts (work contracts or service contracts) with clients directly or through project brokers. Often, extensive contractual obligations such as deadlines, confidentiality and data protection are imposed on you.
This results in numerous compensation risks,often without limitation, for which you as a freelancer and self-employed person are usually liable with your private assets. Some experts rely on having excluded the risk through their terms and conditions, a service contract, or in some other way. But this is a dangerous fallacy, as the following examples show:
1. Do General Terms and Conditions Offer Sufficient Protection for the Self-employed?
No. Practice shows that exclusions or limitations of liability in the terms and conditions often do not stand up to judicial review. Experts estimate that up to 70 percent of the terms and conditions used are at least partially invalid. In addition, general terms and conditions do not protect against claims and lengthy disputes with clients in the event of a damage event.
2. Does Avoiding Work Contracts Provide Protection?
No. Contrary to popular belief, the customer/client is also entitled to compensation for activities on the basis of a work contract or service contract. This applies, for example, to programming errors, advisory errors, copyright infringement or virus damage.
3. Does the LP or LLC Legal Status Provide Protection?
No. Having the legal status of a limited protects the shareholder(s) from creditors’ access to private assets. However, the managing director(s) of the limited (in many companies this person is also the shareholder) is/are liable in many cases with their own private assets - for example in the event of violations of rights and breaches of extensive duties of care both internally and externally. The same applies to the director of the limited.
4. Does a Sonventional General Liability Insurance Provide Protection?
No. Conventional general liability insurance is out of date for IT professionals, media professionals and consultants and completely inadequately insures the specific requirements of freelancers and companies in digital professions. Pure financial losses (e.g. recovery of data due to a software error, programming errors, copyright infringement, service delays, sales and loss of profit for the customer due to business interruption), which are by far the most common type of damage, are not insured without special benefit extensions.
Up-to-date Coverage Through Professional Indemnity Insurance for Digital Professions
Professional Indemnity Insurance for Digital Professions protects you from these claims for compensation and also bears the out-of-court and court costs for any disputes that may arise. In contrast to the typical general terms and conditions, it does not matter to the insurer whether you caused the error negligently.
In other typical freelance professions such as tax consultants, auditors, lawyers or architects, the legislature has reacted to the various liability risks and mandates specific professional or general liability insurance for admission to the profession.