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Tuesday, January 16, 2007

Liability Insurance for Translators

What happens if you've made a mistake in a $100 job, your client claims your mistake cost him $100,000 and sues you for this amount? This is the nightmarish scenario that's being used to sell liability insurance, a.k.a. Errors & Omissions (E&O) insurance, to translators. In fact, at least in the U.S., there is no record of a translator ever having been sued, let alone successfully sued, for translation errors.

Despite this lack of precedent, some translation buyers now require that translators carry liability insurance. For translation companies, this may be an attempt to shift the responsibility for translation quality from themselves to the translator. For some unscrupulous operators, it may even be a ruse to raise cash at the expense of the insurance company (and ultimately of the premium-paying translator) by filing frivolous lawsuits for E&O.

Why hasn't there been any lawsuit for E&O against translators in the U.S., the country known for often frivolous lawsuits? We may have simply been lucky, or translation buyers don't consider translators wealthy enough to be sued. This latter reason would of course disappear if E&O insurance became widespread. According to some, translation is protected under the First Amendment right to free speech, but, to the best of my knowledge, this has never been tested in a court of law.

So, is liability insurance for translators an indispensable protection, an addition to our cost of doing business without any tangible benefit, or a dangerous bait, which by its very existence could encourage lawsuits against translators?

Have you ever been sued, threatened with lawsuit, or do you know of anybody who has been sued for errors and omissions? Do translators and/or translation companies usually carry E&O insurance in your country? Is the American Translators Association right in offering such insurance to its members?


Blogger Eric Bullington said...

I don’t have any E&O insurance and am wary of even considering buying such a policy.

For one thing, my assets are hardly worth suing for at this stage in my career. I would imagine that many translators are in a similar position and could be considered "judgement proof", meaning that no company is going to spend thousands of dollars in legal fees and hours of time just to recoup a few thousand dollars that said translator may or may not possess. And like Gabe, I know of no instances of a client suing a translator for errors and omissions. However, it’s very possible that if all we impecunious freelance translators start to carry insurance, we could drastically increase our likelihood of being sued. I have no idea what the typical limits of these policies are, but if they are anything in the $100,000 range, this sum might be very attractive to an aggressive lawyer.

I am starting to take great care to strike out any translator company contract clause requiring me to assume 100% responsibility for errors and omissions, or requiring me to carry E&O insurance. So far I've asked to modify several contracts with such clauses, and no company has balked at this yet.

Overall, I think it's a very unfortunate trend. Just another overhead cost to be borne by freelance translators.

11:23 PM  
Blogger Unknown said...

I include the following language in my Terms of Service:

"Within the limits of the law, all claims will be limited to the amount of the invoice."

If I was only paid $100 for my translation, this should limit my liability to that amount.

2:11 PM  
Blogger Lanna said...

In the UK, our association - ITI - has arranged a fairly reasonable rate with a professional indemnity insurer, about $150 depending on one's ITI status. If, however, if more than 10% of our turnover comes from clients when the place of contract is in America, the rate is considerably higher.

With some of the multinationals that provide a huge volume of work and take advantage of the time zone differences - Transperfect, for instance - our contact can be with a project manager in London, but since the invoicing/payment system is centralised in the US the contract is in that country.

When we ask our insurer the reason for the higher rate, we are told that it is because of the litigious nature of the business scene in America. So it is interesting to hear that there is no record of translators being sued on your side of the Atlantic either ...

5:14 AM  
Blogger Alliandre said...

I agree with Hasan and, as far as I know, this is the max. amount for wich a translator can be liable here in Italy; for this, I'm wary of agency contracts with insurance/responsibility clauses.
AITI (the Italian translators' association) too has arranged an insurance for translators, but up to now I've never heard of a single translator being sued here in Italy.
Of course I can be mistaken, nevertheless I guess we're too poor as a category to be of interest ;)

3:21 AM  
Blogger S.M. said...

In reality, all insurance does is expose you to more litigation. If you were potentially liable for a problem, the decision to litigate has to do with how valuable your assets are. If you have no business assets, then you aren't worth suing. If you have insurance, BOOM, you suddenly are worth suing.

That said, translators can do a few easy things to protect themselves:

1. Incorporate as an LLC. The LLC, in the United States and similar company forms in other countries, insulates personal property from liability. In the U.S., the LLC for a sole proprietor works exactly the same as a normal sole proprietorship does in terms of tax filing, Schedule C, etc. It's a no brainer. Any translator who is not an LLC is taking unnecessary risk.

2. Your terms of business that should be clear on every invoice you submit and on your Web site and in every business agreement you enter into should clearly include a provision that you, the translator, shall not be held responsible for any errors or omissions or liable for losses or damages incurred through the use of your services. Include a provision that any error drawn to your attention will be corrected immediately, but that your client will hold you harmless, etc.

Once these two steps have been taken, you are fairly well protected from liability.

7:26 AM  
Blogger Janice said...

Check out the person or company who is offering you work. Get full contact details, not just an email address. Get a purchase order in writing before you begin work on a project. You need to do these things to protect yourself - with so much business being done over the Internet, you need to know where you can find someone if for any reason you run into difficulties. Check the payment history of a new potential client through the TCR and Payment Practices Lists. A little research now could save you tremendous problems down the road. Check out this ebook for more tips

12:40 AM  
Blogger Cooper Law Firm - Cooper Translations said...

I also think it is good to include in the Terms and Conditions that any possible damages are limited to the value of the service paid for.


11:54 AM  
Anonymous Anonymous said...

I have been running a translation agency for 21 years and have had only one company sue me for a bad translation. It occurred in 1991 when we were new in the business. The translation was from French into Russian and the translator did a good job. However the end-user company was not happy - mainly because they had an employee who wanted to do the translation himself and was deprived of the money he would have made.
The translation agency (the intermediary between us and the end-user) attempted to sue us three times and unfortunately succeeded at the third attempt.
We had to pay the amount that the translation agency lost, plus 100% compensation for "loss of future sales". The final result was about 3000 euros (about $3750) which was split between us and the translator.
Since then I have always had insurance for one million pounds (1.5 million dollars)which now costs 1750 pounds (about 2600 dollars) per year.
Is it necessary?
Who knows until you get sued.

Of course our quotes and invoices contain a clause that in accepting the quote or invoice, the maximum responsibility for the translation is the value invoiced, but whether that would be sufficient in law is not clear.

Of course, it would also depend on the country where the case was filed.
If more than 10% of our turnover were to be with customers in the US, the insurance premium would be considerably higher, due to the US tradition of frivolous claims being upheld by US judges.

John Hadfield

4:13 AM  
Blogger Unknown said...

Thanks, S.M. for your comment. I just updated my invoice terms to include your second suggestion.

6:22 AM  
Blogger Ali said...

I found your blog very informative about insurance policies and plans.

2:44 AM  
Blogger MFL said...

Very useful

5:12 PM  
Blogger Unknown said...

Thank you very much for your interesting text. I have been looking for such content for a very long time. Not everything is fully clear to me, but it is definitely interesting and worth reading.

professional indemnity insurance

5:24 PM  
Anonymous Anonymous said...

If you are a foreign student, or you need to translate your legal documents to be used in different countries, then translating them to other tongue can solve a lot of problems and can make work faster.
Translation Service.

5:38 AM  
Blogger Evelyn said...

Very useful and informative post about liability insurance and it helped me because i really didn't know those facts and i want to tell you great thank you for this.

9:43 AM  
Anonymous Anonymous said...

Professional indemnity insurance for translators sounds interesting.

2:13 AM  
Blogger najamonline4u said...

There are so many excellent Translation service companies around and the liability insurance for the translators seems very nice. the topic is well well covered in not so long article. such a great post it is. keep it up

11:24 PM  
Blogger Unknown said...

Useful. Keep updating. Thanks.

9:28 PM  
Blogger Unknown said...

Very useful. Keep updating. Thanks.

9:30 PM  
Blogger Unknown said...

The product liability insurance covers you against any unexpected outcomes of production defects, flaws in design or faulty warning provided along with the product.

3:14 AM  

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