Professional Indemnity Insurance Claims

Professional indemnity insurance claims are not, as is commonly assumed, solely the experience of those who churn out work containing technical deficiencies. They extend to cover situations in which consultants probably did nothing wrong but the client made a loss and decided to attack all potential sources of compensation; or the contractor made errors and subsequently went into liquidation; or there were so many parties involved, all with different versions of events, that criticism of the consultant was an inevitability.

All consultants, therefore, need to protect their assets against claims. This is partly achieved by maintaining professional indemnity insurance cover but only if the terms of coverage are suitable and the limit of indemnity is adequate.

All practices, even those with clean claims records, should review their limit of indemnity as a matter of course at each renewal and increase it if appropriate. The incidence of claims exceeding the limit of indemnity is already much higher than it used to be and is a trend which is set to continue. Consultants whose liability exceeds their insurance have to fund the balance out of their own assets to the extent they can.

Effective risk management is as much about preventing spurious claims as it is about avoiding genuine errors.

The task of any professional person is not solely to produce sound advice based on his technical knowledge and experience but also to communicate it effectively - good communication is what makes the difference between producing a solution and providing a service.

Sometimes the consultant has to be prepared to go beyond communicating advice required of him under his appointment, as disputes may arise through others in the team failing to communicate as effectively as they might. Whilst it is true that consultants create problems by exceeding their brief, in practice there are circumstances in which doing so is the best way to protect against spurious allegations if the preventable is allowed to deteriorate into the inevitable.

It should be possible to communicate the relevant message in such a way as to achieve this whilst not materially affecting the consultant’s exposure to liability.

A carefully worded letter might flag a potential issue to the client and merely suggest, with appropriate disclaimers and qualifications, that the client take further advice - which the consultant himself might provide for an additional fee, or which the client might procure from elsewhere. Such cases may constitute circumstances which might give rise to a professional indemnity insurance claim and which should therefore be notified to your insurers. Either way, our specialist claims brokers are available to offer advice.


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