The risk of professional negligence is always there for every professional services business. But there are steps you can take to manage your exposure - and taking out professional indemnity insurance is one such step.
Here we look at the obligations professionals have to their clients and what to consider if you are accused of making a mistake.
- The key criteria for a negligence claim
- Notify your PI insurer
- Try to be neutral
- Retaining documents
- Pre-action protocol
- Summary
Three key criteria for a negligence claim
Being a professional means that if something goes wrong, your client is likely to look to you to put things right financially. Whatever your profession you will owe a “duty of care” to the person paying for your services. A duty of care is an obligation to provide a quality of service which would be expected of a professional engaged in that business.
An accusation of professional negligence will usually be made when the accuser considers that the services have fallen below what would be expected of a reasonably competent professional in that field. But there are various steps that can be taken to limit the risks.
For a professional negligence claim to succeed, there are three key criteria which would have to be found to be present:
1. Breach of Duty of Care
You must owe a duty of care to the complainant. If you were under a retainer with the complainant or instructed to act in their best interests, it is likely you owed them a duty of care. It will need to be shown that you have breached this duty by acting below a reasonable level of competency.
2. Loss
If there is no loss then there is no claim for professional negligence.
3. Causation
If you've breached your duty of care and the complainant is claiming a loss, causation means that the loss has to have been caused by your breach. If the breach, in fact, arises from a separate issue, then clearly the claim for professional negligence won't succeed.
Notify your Insurer
You should notify your insurer immediately on identifying the possibility of a claim against you. Our guide will help you to identify what qualifies as a professional indemnity insurance notification.
Consider every claim neutrally
Naturally, there is a tendency to be defensive when accused of negligence. However, sometimes errors are made and need to be addressed. Accepting where there are problems at an early stage, can enable significant costs to be saved and may also enable you to retain clients, even if matters have gone wrong. If you do have insurance in place, it is important that you do not make any admissions without your insurer’s consent.
Retain relevant documents
As soon as you are aware of a potential issue, you should make sure that you collate all documents (both physical and electronic) which relate to the claim. They will be required to be disclosed if the matter proceeds to Court and will be important for your solicitors to review them to understand the strength of your position.
Pre-action protocol for professional negligence
The Pre-Action Protocol for Professional Negligence is designed by the courts to enable parties to engage in detailed correspondence about the claim in the hope of avoiding litigation. Failure to abide by this protocol can lead to costs sanctions from the courts. In order to satisfy the protocol, a complainant should notify you of the claim initially, and then send to you a substantial letter of claim setting out, among other things:
- The identify of any parties involved in the dispute;
- A clear chronological summary of the facts the complaint is based on;
- The allegations of wrongdoing;
- An explanation of how the alleged error has caused loss; and
- An estimate of the financial loss suffered, together with any supporting documents.
Upon receipt of this letter, there are certain time frames within which you need to act. You must acknowledge the letter within 21 days, and respond in substantive detail within 3 months of your acknowledgement.
The letter of response is a vital element in the first stages of a claim. Whilst it is not binding in subsequent litigation, it sets out the key points you intend to rely on in defending the subsequent claim. It can also be a vital tool in avoiding litigation and entering substantive negotiations with the complainant, if that is your intention.
Summary
Being accused of professional negligence is a serious matter. There are various steps which need to be satisfied for any such complaint to gain any traction, but the earlier these complaints are dealt with, the less management time and pressure you will suffer in the long run.
© Professional Indemnity Insurance Brokers Ltd - This article is intended for information purposes only. Whilst all care has been taken to ensure the accuracy of the information it is not to be regarded as a substitute for specific advice. This article shall not be reproduced in any form without our prior permission.