November 4, 2020
A common misconception among graphic designers and other digitally-based professionals is that working with a contract will cover all their professional liabilities.
But the fact is, even when professionals have a clause in their contract stating that they won’t be held responsible for anything that goes wrong in their client’s business, they could still be sued by the client.
In fact, the list of liabilities in this article are causes for a lawsuit more often than most graphic designers expect. They can happen to the most competent and conscientious professional, even with a robust contract in place. That’s why even professionals with years of experience under their belt should ensure they’re covered with the right insurance and have access to expert legal advice when they need it most.
First, What Exactly is Professional Liability Insurance?
Graphic designers Professional Liability insurance is also known as Errors and Omissions, or E&O. Tailored to the needs of graphic designers, it protects professional service providers from financial losses that can arise from lawsuits and legal actions against their company.
Even if the designer isn’t at fault, they will still need to spend money and time defending themselves in court should an unhappy client decide to sue.
This is where PL can help. This insurance can cover income losses while the designer spent time in court, as well as pay awards, settlements, and judgments to the client when warranted.
It also offers peace of mind. Graphic designers can rest assured that even if they run into unexpected mishaps or a problem client, they’ll be covered in the worst-case scenario.
Now, here are some of the most common reasons graphic designers will need PL insurance.
1) Scope Creep
According to Web Style Guide, scope creep is the most prevalent cause of web project failures. Scope creep is “the gradual but inexorable process by which previously unplanned features are added, content and features are padded to mollify each stakeholder group, major changes in content or site structure are made, and more content or interactive functionality than you originally agreed to create is stuffed in.” (1)
This gradual build-up of project changes ultimately derails the project timeline and alters the budget.
A client could refuse to pay outstanding invoices for these new changes, claiming they should have been included in the initial plan - especially if these changes are not well communicated and realistic expectations between the designer and the client are not set up front.
2) Project Delays
Designers often work to tight deadlines. Missing these deadlines can cause problems if the project has an important launch date.
For example, changes in scope, key contractors or team members leaving mid-project, and other unanticipated changes, can slow down the pace of a project. If the client has a set launch date, missing that deadline could mean the client loses thousands of dollars in wasted marketing campaigns. In turn, the client could refuse to pay the final invoice, or hold the designer responsible for the expense of hiring new contractors to complete the project.
3) Unpaid Invoices
As we’ve discussed above, a client might fail or refuse to pay an invoice for many reasons. But what could go wrong when a graphic designer decides to take legal action against a late-paying client?
In many cases, a client might respond by filing a lawsuit for negligence or other claims if they feel justified in withholding payment. Such claims, even if not true, could damage a designer’s business.
4) Unintentional Breach of Contract
Breach of contract can take many forms. It could be something as simple as failing to deliver a project on time or not meeting the client’s expectations. Any breach of contract may entitle the client to make a claim against the designer.
5) Copyright Infringement
Claims of copyright infringement happen even to the best designers. For example, a designer might design a new logo for a company. Another company, even if not a direct competitor, might claim an element of the logo is too similar to their logo, and start a legal dispute with the client.
This happened in a recent dispute between Canadian media company Nelvana Enterprises Inc. and an Oklahoma cannabis retailer, Treehouse Dispensary LLC. The media company accused the cannabis dispensary of copying their children’s television program logo, which shared the same name. The dispensary ended up losing the dispute, incurring $74,000 in legal fees. (2)
PL insurance covers against copyright infringement, trademarks, slogans, and domain names.
6) Breakdown of the Client Relationship
Like unpaid invoices, breakdowns in the client relationship are a common catalyst for professional liability claims. Despite the best efforts to make a project run smoothly, sometimes a client relationship just isn’t working out, and the designer has to burn bridges. Whether it’s scope creep, constant changes to the project, or poor pay, a designer might find that the stress of the project just isn’t worth it and decide to walk away from the project.
Unfortunately, “firing” a bad client can backfire. For example, the client might demand reimbursement for the money already paid to the designer. They may also want to claim damages for the loss of income due to the delayed project launch or compensation for hiring other contractors to complete the project.
How SWG Can Help
At South Western, we understand the complex and changing world of graphic design. Today’s designers work digitally, which means constantly keeping up with changing online trends and legislation. At the same time, they are competing in a global marketplace, composed of agencies and freelancers.
When a service provider has PL insurance, they have a team of legal experts behind them. PL insurance also helps graphic designers communicate with their client to avoid problems escalating.
SWG PL - Miscellaneous Professional Liability insurance offers a packaged E&O and CGL policy that covers a wide range of classes of business. Tailored E&O coverage protects small to large firms from a broad range of miscellaneous risks. SWG provides a Miscellaneous PL policy at competitive rates, bringing extensive knowledge and underwriting experience in professional liability.
Visit our product page to download the application and submission instructions.
Content is current as of the date of broadcast and is subject to change without notice.