Professional indemnity insurance (BAV) for a self-employed legal counsel
As an interim legal counsel you sit inside the organisation, but you are not an employee. The protection an in-house lawyer on the payroll enjoys does not apply to you.
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In brief
A legal counsel hired on an interim basis does in effect the work of an in-house lawyer: drafting and reviewing contracts, negotiating supplier terms, setting up compliance, handling disputes, assisting with an acquisition. The difference from an employee lies not in the work but in the liability position. An employee is only liable under Article 7:661 of the Dutch Civil Code in cases of intent or wilful recklessness; as a contractor you do not have that threshold and you are judged on the duty of care in Article 7:401 of the Dutch Civil Code.
The loss arising from this work is almost without exception financial. A limitation of liability worded incorrectly and therefore ineffective, a non-competition clause drawn too widely, a processing agreement that leaves the client liable, a notice period calculated incorrectly, a warranty in a purchase agreement that points the wrong way. That is pure financial loss, and professional indemnity insurance exists for it. The general explanation is on the hub page on the BAV.
Look closely at the contract under which you are hired. Larger clients use purchasing terms in which your liability is unlimited, in which you indemnify them against third-party claims or which contain a penalty clause. Liability accepted by contract that goes beyond what the law imposes is excluded on virtually every BAV. You would then be signing up to an obligation your insurer does not follow. Negotiate it away or accept deliberately that you carry that part yourself.
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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We report the claim and monitor how it is handled. In urgent cases you can reach us on the emergency line.
Four points to note in interim legal work
The discussions that most often lead to a rejection for a self-employed legal counsel.
Indemnities and penalty clauses are not followed
If you include an indemnity for third-party claims in an engagement agreement, or accept a penalty per breach, that is an obligation you create yourself. Policies exclude liability entered into purely by contract, as well as fines, penalty payments and liquidated damages. What is insured is what you have to pay under the law, not what you have promised.
Joining in decisions can make you a director
If you are appointed a statutory director, or behave as a person effectively determining policy, your risk shifts to Article 2:9 of the Dutch Civil Code and, in an insolvency, to directors' liability. That falls outside the BAV and belongs on directors' and officers' liability insurance. So keep the separation between advising and deciding explicit and in writing.
Your professional capacity is 'advising', not 'implementing'
If, alongside legal advice, you also take on operational duties – taking purchasing decisions, handling personnel files, carrying through a reorganisation – you are doing work that may fall outside your stated professional capacity. Have what you actually do included on the policy schedule. A description that reads only 'legal adviser' does not cover interim management duties.
The risk continues after the engagement
A contract you draw up this year can fail in a dispute four years from now. Because the BAV works on a claims-madebasis, what matters is whether you are still insured at the moment of the claim. If you close your practice or take a job, buy run-off cover before you cancel. Afterwards it is no longer possible.
What does your premium depend on?
- Annual turnover from interim engagements: the standard basis for calculating the premium
- Sector of the clients: financial services and healthcare weigh more heavily
- Size of the transactions: contracts with large interests increase the loss potential
- Clients' purchasing terms: unlimited liability makes the risk harder to place
- Working area: engagements under a non-European legal system are assessed separately
- Retroactive and run-off cover required: both extend the period in which you are protected
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | AVB | BAV |
|---|---|---|
| A limitation of liability you wrote turns out to be ineffective and the client carries the full loss | No | Yes |
| You calculate the notice period of a distribution agreement incorrectly and the client has to keep paying for a year | No | Yes |
| A warranty in a purchase agreement points the wrong way and the buyer claims against your client | No | Yes |
| You knock over a cup onto the client's presentation screen in the meeting room | Yes | No |
| You sign a contract under a power of attorney that exceeds the internal mandate | No | Provided that |
| The client does not pay your last monthly invoices because contracts had to be rewritten | No | No |
What you have to do again yourself is not a loss. What your client loses in addition is.
Frequently asked questions
This is what people ask us most.
My client says I am covered by their insurance. Is that right?
Rarely without more. A company policy generally insures the company and its employees. A hired-in self-employed professional only falls under it if he is expressly included in the class of insured persons. Have that confirmed in writing, stating the policy and the provision it rests on. Without that confirmation you depend, when a claim arises, on your client's willingness to indemnify you.
Is a fine imposed on my client by a regulator covered?
No. Administrative fines and penalty payments are excluded on virtually every liability policy, even if the client asserts that the fine results from your advice. It is a sanction and not compensation. What can be covered is the consequential loss the client suffers in addition, for instance the cost of putting right a process that has to be done again.
What if I also advise on privacy and a data breach follows?
Advice on how data processing is set up falls under your professional liability. If your advice turns out to be unsound and the client suffers financial loss as a result, that is BAV territory. The cost of the breach itself, such as investigation, recovery, notification and claims by data subjects, belongs on a cyber insurance of the organisation that processes the data.
How does this compare with a self-employed lawyer with his own clients?
The work overlaps, but the risk is spread differently. A lawyer with his own practice serves many clients and can impose his own general terms. An interim counsel works for a long period inside one organisation and often has purchasing terms imposed on him. See also professional liability for a self-employed lawyer for that variant.
Every situation is different. For these situations we have a separate page.
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