Professional indemnity insurance (BAV) for an HR consultancy
Your advice is carried out by the employer. If a dismissal fails or a calculation is wrong, the bill goes to the firm that advised it.
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In brief
Employment law is precision work with strict deadlines, and that makes HR advice prone to mistakes in a way that costs money directly. An application to terminate that fails because the file does not meet the test in Article 7:669 of the Dutch Civil Code, a summary dismissal that fails on the requirements of Articles 7:677 and 7:681 of the Dutch Civil Code, a wrongly applied chain rule under Article 7:668a of the Dutch Civil Code so that a permanent contract has arisen unnoticed, a redundancy selection that is wrong in a reorganisation. That is pure financial loss for your client.
Watch the boundary with advice requiring a licence closely. Advising on pension schemes, sickness absence insurance or disability insurance falls under the Dutch Financial Supervision Act (Wft) and requires a licence. If you do that without a licence, it lies outside your insured capacity and a claim about it is not covered. Refer that part to a financial adviser and record the referral.
In sickness absence cases there is a second boundary: you may not process employees' medical data, which is reserved to the company doctor. If you do advise on the basis of diagnostic data, your client breaches the GDPR. Fines from the Autoriteit Persoonsgegevens (the Dutch data protection authority) are not insurable. The cost of a breach in your own systems belongs on cyber insurance for HR and recruitment agencies.
This page deals with one situation. The full overview is on Compare professional indemnity insurance (BAV).
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Professional indemnity insurance (BAV)
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Help with claims
We report the claim and monitor how it is handled. In urgent cases you can reach us on the emergency line.
What to look out for
Four points on which HR consultancies are held liable in practice.
A file that does not pass the test
In cases of underperformance the law requires an improvement programme with a realistic chance of success and a written record. If you advise pressing ahead when the file is thin, refusal of the application or fair compensationfollows. Put your reservation in the advice itself, not in a conversation. When a claim arrives, what is on paper counts.
The boundary with advice requiring a licence
Pensions, insured schemes and financial provisions fall under the Wft. If a claim arises there, the insurer first tests whether you acted within your professional capacity. Outside the professional capacity there is no cover, however carefully you worked. State expressly in your engagement confirmation what you do not do.
Recruitment, selection and equal treatment
In recruitment there are complaints about discrimination in job applications and about careless screening. Claims arising from discrimination or unlawful treatment are excluded or limited on various policies. If you also do recruitment, have that included separately; also compare liability insurance for a recruitment agency.
What is excluded
Excluded are intent and wilful recklessness (Article 7:952 of the Dutch Civil Code), fines from the Nederlandse Arbeidsinspectie (the Dutch labour inspectorate) and the Autoriteit Persoonsgegevens, redoing your own advisory work and refunding your fee, and liability you carry as formal or de facto employer when you hire out staff yourself.
What does your premium depend on?
- Annual turnover: the usual basis for advisory work
- Composition of your services: advice, interim work and recruitment each carry their own risk
- Number of advisers and hired-in staff: including self-employed contractors working under your name
- Size of your clients: reorganisations at large employers increase the exposure
- Retroactive period: employment law claims often come with a delay
- Sum insured and excess: per claim and capped per insurance year
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | AVB | BAV |
|---|---|---|
| Your consultant presses ahead with an application to terminate on a thin file and the court awards fair compensation | No | Yes |
| A temporary contract is extended on your advice and a permanent employment relationship arises unnoticed | No | Yes |
| A rejected applicant accuses your client of discrimination in the selection you carried out | No | Provided that |
| A member of your staff damages a glass partition at a client's premises | Yes | No |
| You advise on a client's pension scheme without the licence required for it | No | No |
| A client withholds the final instalment of the invoice because the reorganisation went differently than expected | No | No |
Recruitment and selection is regarded by insurers as an activity in its own right and must be stated separately on the policy schedule.
Frequently asked questions
This is what people ask us most.
Are we liable if the employer alters our advice?
Only for your own failure. If the client departs from it, shortens a programme or holds the meeting differently from what was advised, the cause shifts to him. The condition is that your advice and your warning are recorded in writing. Without that, the discussion still comes down to whether you were clear enough.
We also advise on the pension scheme. Is that included?
Usually not. Advice on pensions and insured terms of employment is financial advice requiring a licence and falls outside the description of an HR consultancy. Limit your role to the process and the employment law side and refer the substance elsewhere. Have what you do do recorded in the policy, so that no discussion about professional capacity arises afterwards.
Is a fine from the labour inspectorate imposed on our client insured?
No. Administrative fines are a penalty and not compensation and are therefore excluded on every liability policy, even where your advice was the reason for it. Passing such a fine on by your client generally falls outside cover too. The rest of the loss caused by your mistake is insurable.
Do we also need public and employers' liability insurance (AVB)?
As soon as your consultants visit employers, yes. Damaged equipment or injury during a session on site is damage to property and injury and falls outside the cover here. That belongs on a public and employers' liability insurance. The two policies are often offered as one package.
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