(by Elton Mwangi)
No one wants it to happen, but there may come a time when you have to file a professional indemnity claim. As a professional, you’re obligated to provide a duty of care to your clients when you offer professional services. But if you breach this duty of care, you’ll be sued.
For instance, if a marketing company forgets to include a client’s website address or omits a digit from their phone number in a printed advertisement, the client can sue the agency for marketing fees and costs of reprinting the ad.
Also, an accountant can be sued by the client for unintentionally sharing the client’s confidential financial information leading to financial loss.
These claims happened, and they can happen to you. That’s why understanding the claims process is crucial to mitigating losses.
Filing A Professional Indemnity Claim
The Notification Stage
Once a claim related to your professional work is made against you, you must inform your insurer. If you determine a circumstance that may result in a claim, also notify them.
Notifying the insurer about a claim or circumstance shows that you’re sufficiently considering risk management; it doesn’t necessarily translate to higher premiums. But talk to your insurance broker if you’re unsure about sending the notification.
The insurance company has the right to reject the full claim or part of it if they think your failure to involve them early has jeopardized the insurer’s position. Insurers want to know about a potential claim as early as possible to avoid the claim costing an arm and leg.
The Pre-Action Stage
After you notify your insurer about a potential professional indemnity claim, they will request detailed information to make informed decisions.
Such information includes:
- Copies of correspondence like letters, legal documents, and emails relating to the claim.
- The date you knew about the claim.
- The identity of the claimant and related parties.
- A brief overview of the claim and your opinion on liability.
- An assessment of the claim’s financial value.
- The insurer will appoint experts and lawyers to guide you through the claims process.
The Negotiation Stage
Parties will try to keep costs to a minimum by keeping the dispute out of court. In this case, they’ll apply Alternative Dispute Resolution (ADR) techniques like mediation.
The time and costs spent fighting a claim in court can outweigh the benefit of not settling, even when you think the claimant is being unreasonable. What’s more, the court will have a negative opinion of parties who refuse to negotiate.
The Litigation Stage
Claims that end up in trial are as rare as a hen’s teeth. But if the parties don’t agree during the negotiation phase, litigation ensues. Your insurer will appoint solicitors who will advise you and the insurance company under a dual retainer.
Both parties may avoid a trial because the guarantee of success is slim, and preparing for and conducting a trial is time-intensive and costly.
You also don’t want to wash your dirty laundry in public.
Professional Indemnity Claim Checklist
When there’s a professional negligence claim against you, do these three things:
- Liaise with employees and colleagues to gather relevant documentation to present as a claim’s notification to the insurance company.
- Draft a response to claims and complaints for the insurer to review.
- Hold meetings with lawyers, insurers, and related parties, and attend negotiations and the trial.
Failure to notify claims to the insurer is an expensive affair, meaning the insurer may not settle the full or part of the claim. That said, offer all the information related to the claim and all the documents they request from you during the pre-action phase.
Mediation is the best way to settle claims as it saves both time and money. Going to trial is an expensive affair that consumes time and jeopardizes your reputation.
The claimant’s appetite determines the length of the claim process. Therefore, before things get out of hand, seek the advice of your insurer, lawyer, and insurance broker. Zupnick & Associates will guide you during the initial stages of notifying your insurance company. Contact us today!