You have advised your customer as best you can, but something’s gone wrong and your client has now submitted a claim for compensation from you. In general, if a consultant makes a professional error in the advice offered, and this causes losses for the client, the consultant is liable to pay compensation. This is stated in the legislation. However, it is not that simple, because a large number of legal requirements have to be met before a consultant can be made liable. And it’s important to know these requirements so that you are not made liable for the error unlawfully.
Your advice for your client must have been on the basis of your professional competences. However, according to the Danish legislation on liability, the client may demand compensation if, for some reason or other, you have advised your client incorrectly or inadequately.
If you are to be made liable as a consultant, there must be evidence that your client has suffered a financial loss and this was caused directly your advice. If the client has suffered a financial loss that the client would have suffered at all events, you will not be liable as a consultant. Whether or not the client's loss is due to your advice will be determined by a judge’s interpretation of the case, if you and your client cannot agree.
There are many good reasons to draw up a good and precise consultancy agreement in cooperation with your customer. One of the reasons is that you can specify what you as a consultant can take responsibility for, and you can also limit your liability. However, you should note that the limitations on liability you have written into your contract with the customer may have their own constraints. If you are in doubt, you can always contact IDA.
You run into bad luck. You have given your client incorrect advice. Your client has suffered a financial loss as a consequence of your advice. Your client holds you responsible and claims compensation. Many independent consultants don’t think about of taking out professional indemnity insurance. They think: I only have a small turnover and fees. My clients could never hold me liable. Or: I never make mistakes! But in reality, your advice can have serious consequences, and many also experience that their clients make unjustified claims. With professional indemnity insurance, you can make sure that you have advisors and lawyers who can help you in any claim and who can reject the claim if it is unjustified or unlawful. Of course, the insurance will also cover the claim if necessary.
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