In the modern world, professionals need to ensure they have sufficient civil liability protections to guard against professional negligence
Traditionally, professional negligence claims were only made against architects, accountants, engineers, financial advisors and solicitors. However, in the modern world, civil liability claims have become common against any professional that holds expertise and skills in the services they provide.
Advertising, consultancy, contractors, design, inspection, intermediaries, marketing, project management and software development. Just to name a few, can all become the target of civil liability allegations and should consider professional indemnity insurance.
So... how can your businesses protect itself from costly legal disputes and civil liabilities?
Protections against civil liability claims include:
1) Contractual conditions
Contracts between a service provider and their clients are an effective method to mitigate your risk. Clear and unambiguous contracts that include the following can offer a level of protection, however if you have found to be negligent you can still be liable for damages.
Specific description of services – can reduce the risk of any misunderstandings occurring down the line.
Limitations of liability – will attempt to restrict the damages one party can recover from the other party.
Consequential losses exclusion – will attempt to restrict the damages which are not a direct result of an incident but are instead consequences of that incident.
Performance standard – your contracts provide a performance standard no greater than reasonable care and skill.
2) Complaints handling
Complaints can provide useful feedback and allow the opportunity to gather all the facts. If you can correct the issue prior to a dissatisfied client seeking legal advice, you can potentially save yourself a lot of time and cost down the line.
A complaint is a dissatisfaction, whether written or oral, whether justified or not, about your failure to deliver a service. A six step strategy can be found in the Complaints Investigation Toolkit to mitigate potential civil liabilities.
A complaint register and procedure should record and investigate all complaints fairly to determine whether the complaint should be upheld and any remedial action or redress. This can offer your business the ability to address any issues before they escalate into costly professional negligence claims.
3) Risk management
A risk management strategy
will need to be tailored to your business allowing for the identification, evaluation and control of risks. To prevent against civil liabilities and professional negligence claims, you may consider incorporating:
Professional training and qualification program
Standard contracts vetted by a legal professional
Written guidance for customer engagement
Conflicts of interest policy and procedure
Second pair of eyes sign-off procedure
File audit process
4) Professional indemnity insurance
Professional indemnity insurance
will provide legal costs incurred in defending allegations and pay damages as a result of failing to exercise reasonable skill and care. There are commonly two options when you purchase professional indemnity cover:
A negligence policy – provides cover if you breach your duty of care, by way of a negligent act, error or omission.
A civil liability policy – provides cover for negligence, breach of contract, breach of trust, breach of fiduciary duty or breach of statutory duty. A civil liability insurance policy does not restrict cover to the nature of the civil wrongdoing.
The most cost-effective cover is offered under a negligence policy because the policy is limited to allegations of negligence. Whereas, a civil liability insurance policy can offer broader protection against a wide range of allegations.
Civil liability is defined as the legal obligation that arises from a wrongdoing that isn’t a criminal act. Civil liability claims can be based on a number of legal grounds, including the tort of negligence, breach of contract, breach of trust, breach of fiduciary duty or breach of statutory duty.
Civil liability claims brought under professional negligence occur when a service provider doesn’t perform their responsibilities to the level required of a reasonably competent person within their profession.
These are viewed as more difficult to succeed, because they must prove you owed them a duty of care, you breached that duty and they suffered financial loss as a direct result.
However, if they have a contract with yourself and can prove you failed to deliver on the professional services that were agreed, they potentially have a higher chance of making a successful civil liability claim under breach of contract.
Civil Liability Insurance - Posted by Get Indemnity
This guide is for information purposes and based on sources we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.