Insurance, Contracts and Working With Suppliers

Why it feels awkward and is not

Asking a sole trader for evidence of insurance feels like an accusation, particularly when you know and like them.

It is not. Any established supplier has been asked before, will have the certificate to hand, and will think better of you for asking rather than worse.

The awkwardness is one-sided, and it comes from the buyer imagining an implication that the supplier does not read into it.

What follows is a general description rather than legal or insurance advice. What cover is appropriate depends on the work, the jurisdiction, and the size of the risk, and a broker is the right person to ask about your own position.

The two that usually matter

For most small suppliers to a small business, the relevant cover falls into two categories.

Professional indemnity, which responds where advice, design, or work product causes a client financial loss. That is the relevant one for anybody producing something you rely on: a website, a system, an accountant's work, a consultant's recommendation.

Public liability, which responds to injury or property damage. That is the relevant one for anybody attending your premises or working on your property.

A web designer working remotely genuinely needs the first and may not need the second. A trades supplier working on your building needs the second and possibly the first.

Asking for the one that fits the work is what makes the request specific rather than a form-filling exercise.

What else appears on the list

• Employers' liability, where they have staff, often a legal requirement.
• Cyber cover, where they hold or process your data.
• Product liability, where they supply physical goods.
• Motor insurance for business use, where they drive to you.
• Workers' compensation, depending on jurisdiction and staffing.

Which of these applies varies considerably by place and by trade, and it is the sort of thing a broker or an industry association can answer quickly for your sector.

Ask for the certificate

The practical point that makes the request meaningful.

A statement that they are insured is not evidence. A certificate names the insurer, the policy number, the cover limits, and the dates.

Check the dates, because an expired certificate is the single most common finding and is usually an oversight rather than a problem.

Check the limit against the size of the risk, since cover well below the value of the work is a technicality rather than protection.

And note the renewal date so you can ask again once a year without it being an event.

Proportionality matters

The judgement that keeps this reasonable.

A three hundred dollar job from a sole trader does not warrant a certificate request, an indemnity clause, and a supplier questionnaire, and imposing that on somebody small is how a business becomes tiresome to work with.

The threshold worth applying is what could go wrong and what it would cost, rather than the value of the engagement.

Somebody spending an afternoon on your site cannot easily cause a large loss. Somebody handling your customer database, taking payments, or working on your roof can.

Scale the request to the exposure rather than to the invoice, and say why you are asking, which removes most of the friction.

A worked example

A business engaged a developer to move their online shop to a new platform, including customer records and stored payment arrangements.

They asked for professional indemnity and cyber cover, explaining that the work touched customer data and order history.

The developer had professional indemnity and no cyber cover, said so plainly, and asked what the client would prefer.

They agreed a limitation on the developer's liability at a level he could actually stand behind, and the client separately confirmed their own cover would respond to a data incident.

The migration went fine and none of it was needed.

The value was that both parties knew where they stood before starting, and the conversation took twenty minutes rather than becoming a dispute afterwards.

Insurance is not the same as a contract

A distinction worth holding, because they are often conflated.

Insurance determines whether there is money behind a claim. A contract determines whether you have a claim at all and what its limits are.

A supplier with excellent cover and terms limiting their liability to the fee paid is offering you the fee back, not the cover.

Conversely a supplier with unlimited liability on paper and no insurance is offering something they cannot pay.

Read them together: what does the agreement say they are responsible for, and is there anything behind it.

For a small engagement, a limitation to the value of the contract is common, reasonable, and worth knowing about rather than objecting to.

What a small supplier can reasonably decline

Worth knowing so the request stays fair.

Being named on your policy, or providing indemnities well beyond the value of the work, is disproportionate for a sole trader and many will refuse for good reason.

Cover limits substantially above their normal level are expensive to arrange for one client and the cost will reach you anyway.

And extensive supplier questionnaires designed for large organisations are a poor fit and take a day somebody has not priced.

Where a genuine requirement exists that a supplier cannot meet, the honest options are to accept the risk deliberately, to reduce the scope so the exposure falls, or to use a different supplier.

The counter-case

There is a version of this that costs more than it protects.

A business that applies a formal supplier assessment to every engagement will find that good small suppliers stop quoting, because the administration exceeds the margin on a small job.

You then end up choosing between larger suppliers at higher rates, which may be a worse outcome than the risk you were managing.

There is also a limit to what insurance solves. It pays money afterwards; it does not prevent a project failing or recover time.

The measures that reduce the actual risk are the ones covered elsewhere: owning your domain, holding your own backups, staging payments, and being able to continue without any single supplier.

What to ask

1. Decide what could go wrong and what it would cost.
2. Ask for the cover that fits the work, not a list.
3. Request a certificate, not a statement.
4. Check dates and limits.
5. Read the liability clause alongside it.
6. Keep the request proportionate to the exposure.
7. Note the renewal date and ask again yearly.

Step five is the one that changes what the answer means, since cover and contractual liability only protect you where they overlap.

What else belongs in a small agreement is covered in a contract for a five thousand dollar project.

Frequently asked questions

West Coast Media Solutions Inc. provides web design, web development, hosting, digital marketing, and business consulting to organisations across Canada, drawing on more than twenty-five years in the field.