The Three Steps to Making a Professional Indemnity Claim
If you face a claim for professional negligence in your capacity as an accountant it can be a stressful, time consuming, expensive and confusing process. So that you’re prepared, should the worst happen, we’ve outlined below the professional negligence claim process and what to expect in a typical claim scenario.
Professional indemnity policies require you to notify your insurers if you become aware of a claim against you in relation to your professional activities, or you become aware of a circumstance which may give rise to a claim.
If you have any doubt as to whether you should notify a claim or circumstance you should consult with your insurance broker and they will advise you. It is worth remembering that simply making a notification to your insurers does not necessarily mean that you will have to pay higher premiums or that your business becomes a less attractive risk. Depending on the size of your business and the type of activities you undertake insurers may be more concerned if you aren’t notifying occasional issues. It could suggest that you are not giving adequate consideration to risk management.
Failing to notify claims and circumstances promptly can often exacerbate a problem and potentially prejudice your own and insurers position. It is important to build a culture within your business where staff and colleagues come forward with any concerns, rather than either ignore the issue or attempt to resolve it themselves.
The pre-action phase
Once you have notified a claim or circumstance insurers will usually ask for detailed information on the matter to enable to them to give the case full consideration. They will also ask for your views on whether you believe you might have a liability to your client, together with your thoughts on the potential value of any loss.
If you have received a letter which purports to be a pre-action protocol letter of claim you will need to follow the procedures laid down in the relevant pre-action protocol, details of which can be found on the Ministry of Justice website. Your insurers will guide you through the process and will appoint lawyers and experts as appropriate.
To negotiate or not
Parties to a dispute can negotiate at any time. Quite often formal dispute resolution mechanisms, which generally fall under the banner of Alternative Dispute Resolution (ADR) are used. This typically takes the form of a mediation or without prejudice meeting. The aim is to attempt to resolve the dispute in an effective way and keep costs to a minimum. Although it is not obligatory to engage in ADR, the courts take a dim view of parties who do not engage with it – unless they have good reason not to.
If you are faced with a claim it is important to give careful consideration to the risks attached to continuing to fight a claim. The costs and time spent fighting a case can quickly become disproportionate. Taking a commercial approach (even if you are sure that the claimant’s position is unreasonable) can often pay dividends in the long-run.
The litigation phase
If a claim is not resolved in the pre-action phase or through ADR, litigation might ensue depending on the appetite the claimant has for pursuing the matter.
Assuming that there are no issues arising out of whether your policy will respond, your insurers will appoint solicitors (if they have not done so already) and they will act under a dual retainer advising both you and insurers.
Thankfully, as noted above, it is quite rare that a claim will end up at trial. Preparation for and conduct of a trial is a costly and time consuming business. There is also no guarantee of success. You could get the wrong judge on the wrong day. The courtroom is also a very public place to air your dirty linen. That is not to say that some cases shouldn’t be defended vigorously. Just pick your battles carefully and go into the courtroom with your eyes wide open having fully assessed the risk with your advisors.
PI Claim Checklist
There are three essential things to do when a professional negligence claim is made against you:
- Gather and review relevant papers to present to your insurers as a claims notification. This might include liaising with colleagues and other parties to obtain all relevant information and documentation.
- Engage in drafting correspondence for your insurers to review. Generally insurers will ask you to draft responses to complaints and claims for their consideration.
- Hold meetings with insurers, lawyers and other relevant parties, and attend mediations and even a trial if a matter escalates. It is thankfully quite rare that professional negligence claims end up with a trial, but the process of attempting to rebut or (if necessary) settle a claim is often lengthy.
If you require guidance on making a claim or need to discuss an existing claim, call the Bluefin Professions Claims Team today on: 0345 241 1245