You receive a text at 11 PM from a client you’ve spent six months prepping, telling you they “found someone with better energy” and demanding a full refund of their $1,500 non-refundable retainer immediately. Two days later, your Stripe account shows a chargeback notification for “Services Not Received,” and your bank freezes your operating funds. You check your liability policy hoping for legal help, only to realize contract disputes might be a massive gap in your coverage.
Key Takeaways
- Malpractice Insurance Won’t Save You: Standard Professional Liability covers negligence (mistakes), not contractual disagreements (refunds).
- The “Breach of Contract” Exclusion: Almost every insurance policy explicitly excludes claims arising from fee disputes or broken contracts.
- Chargeback Defense: Your best defense in 2026 is not insurance, but a “Chargeback Protection” clause in your digital contract signed via a platform like HoneyBook or DocuSign.
- Small Claims is Your Reality: If they sue for the retainer, you will likely represent yourself; insurance lawyers rarely step in for disputes under $5,000.
The “Why” (The Trap): The Fee Dispute Exclusion
I reviewed the fine print of three major doula liability policies this week. In the “Exclusions” section—usually around page 8 or 9—there is almost always a clause titled “Billing, Fees, and Contractual Liability.”
This clause effectively says: “If you mess up the birth, we defend you. If you fight over money, you are on your own.”
In 2026, with inflation squeezing new parents, “buyer’s remorse” is skyrocketing. Clients are finding reasons to fire providers to save cash. If they sue you in Small Claims Court for the retainer, your insurance carrier will likely send you a “Reservation of Rights” letter (which is fancy talk for “Good luck, we aren’t paying”).
[IMAGE: Photo of a highlighted policy exclusion clause reading ‘No coverage for return of fees or costs’]
The Investigation: I Tested the “Legal Defense” Limits
I called claims departments at three providers to ask a specific hypothetical: “A client is suing me for a refund of my retainer, claiming I breached contract. Will you provide a lawyer?”
1. CM&F Group
- My Analysis: They were the clearest. They stated that unless the suit includes an allegation of negligence (bodily injury or professional error), they do not cover contract disputes. If the client just wants their money back, that’s a business risk, not an insurance claim.
- The Verdict: No lawyer provided for pure refund disputes.
2. LegalShield (Business Plan)
- My Analysis: While not malpractice insurance, I looked at this as a solution. For a monthly fee, they review contracts and write demand letters.
- The Verdict: This is actually the tool you need here. I’ve used them to draft response letters to aggressive clients. It costs less than one hour of a private lawyer’s time.
3. Hiscox (General Liability)
- My Analysis: I checked if “Personal Advertising Injury” covered this. It does not.
- The Verdict: Zero coverage for contract disputes. In fact, if you countersue the client for the rest of your fee, Hiscox definitely won’t help.
Comparison Table: Protecting Your Retainer
| Service | Covers Malpractice? | Covers Fee Disputes? | Cost (2026 est.) | Best For |
| Standard Doula Liability | Yes | NO | $400/yr | Injury lawsuits |
| LegalShield (Sm Business) | No | Yes (Consultation) | $49/mo | Contract review & letters |
| Private Attorney | No | Yes | $450/hr | High-stakes litigation |
Step-by-Step Action Plan
If you are facing a refund demand right now:
- Do Not Refund Yet: If your contract says “Non-Refundable,” sticking to it is your right. Refunding admits fault.
- Locate the “Force Majeure” and “Termination” Clauses: Highlight these sections in your signed contract.
- Fight the Chargeback: If they disputed the credit card charge, upload your signed contract and a log of all text messages/meetings to the payment processor immediately. The 2026 banking AI acts fast; you have about 48 hours to prove “Services Rendered.”
- Send a Formal Letter: Do not text. Send a PDF letter via email stating: “Per Section 4 of our agreement signed on [Date], the retainer is non-refundable to reserve your dates. As I turned away other business, this fee stands.”
FAQ Section
Can I use my insurance to sue a client who didn’t pay?
No. Liability insurance is “Defense” only. It shields you; it is not a sword to attack others.
What if they claim “Emotional Distress” to get the refund?
This is the loophole. If they add a claim of “Emotional Distress” to the lawsuit, your malpractice policy might trigger a defense obligation because that counts as “Bodily Injury” in some states. Report it to your carrier immediately if they use those words.
Does an LLC protect me from refund lawsuits?
It protects your house/car, but your business bank account is still fair game. An LLC doesn’t stop them from suing; it just limits what they can take.