I bill for a couple of psychologists on the side. My income from this venture is less then 15,000.00. It has come to my attention that I should get an LLC and liability insurance to protect my personal assets. I am interested on your thoughts on this and also any leads for affordable liability insurance.
I would suggest talking to an accountant regarding the LLC. That’s what we did when we set up our billing business as an LLC. From what I could tell it could be set up fairly easily. I’m certainly no expert on the subject but it does have the advantages of limiting your personal liability.
What I would suggest is to structure the client agreement – or contract – so as to protect yourself and minimize your risk. I would suggest getting an attorney to look over any client agreements. We haven’t taken on liability insurance as we really haven’t encountered a situation where a client has been disgruntled enough to pursue any legal action. With regard to HIPAA, billing services are typically covered under a Business Associates Agreement with the provider – which many providers will ask you to sign now.
We do have a provision in our contract which some protection on the matter:
Client agrees to indemnify and hold ACME harmless for any and all damages or penalties imposed and any attorney’s fees incurred by ACME in defending any such action resulting from Client’s failure to provide truthful and accurate billing and claims information to ACME.
Again I encourage you to get a lawyers professional advice as to the best wording. If a client accuses a billing service of incompetence, I don’t know that there’s any wording to protect against that – not that proving such would be very easy for a disgruntled client.
That being said there is really nothing to prevent a disgruntled client from pursuing legal action. But with the type of services a billing service offers – I really don’t think it would be very feasible financially for a client to pursue the billing service. Unless they thought there was a good chance they would prove their case and recover enough to justify the legal expenses.
For small home based service businesses, the type of insurance you would consider is called Errors and Omissions insurance – also referred to as E&O insurance – a type of professional liability insurance. This type of insurance concerns alleged failure to perform on the part of or financial loss caused by an error or omission in the service provided. Many find the cost of E&O insurance to be prohibitively expensive – especially if your business is not making that much. I think you really have to weigh the risks of what could go wrong and the type of work we do – and the likelihood someone would take legal action.
From what I’ve seen it can cost from the hundreds annually to the thousands depending on coverage and deductible. I don’t think the damages a billing service could be held liable for would be that high – just more negligence and incompetence and lost revenue.
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