Do not walk on egg shells when servicing clients

Mistakes happen, as do careless errors. Omissions or negligent wrongful acts cannot always be foreseen. While it is important to avoid mistakes, there is no real way to predict when human error will occur, regardless of the industry you are in. This is why Professional Indemnity Insurance (PI) is so important – particularly in an age where people are inclined to pursue legal action at the smallest possible mistake.

PI is a form of liability insurance that covers risks emanating from dispensing professional advice to a third-party and its definition extends beyond traditional professions, such as architects, engineers, surveyors, lawyers, insurance brokers and accountants, to anyone who has specialised skills or knowledge. In fact, anyone who gives professional advice falls within this bracket.

Facing the mistakes

Particular risks that professions may face include negligent breaches of contracts or duties, negligent wrongful acts, negligent errors, negligent omissions, as well as any unintentional libel or slander.

In cases where an individual is involved in joint-ventures or where some of the professional services are contracted to sub-consultants, this individual can be sued alone or jointly with the other parties; therefore it is important to always have PI cover in place. At a Norton Rose Fulbright function in March, Caroline Da Silva, Financial Services Board’s Deputy Executive Officer for FAIS, signalled the FSB’s intention that companies will be liable for the actions of their brokers if they distribute products through these channels, whether they are tied or independent.

The PI insurance package extends to cover the loss of documents, related defence costs, and any other costs incurred in mitigating or preventing a claim that is likely to occur.

Potential client risks

Every profession is different. All industries have different risks associated with them, and although some may be common, most are industry specific.

A negligent act on the part of an engineer, for example, can easily lead to third-party liability costs such as damages awarded by the court, including bodily injury or loss of life. Negligence on the part of a journalist, as another example, can lead to unintentional libel and slander, and this cannot always be corrected by publishing an apology. This particular brand of lawsuit is becoming increasingly popular as consumers become progressively more aware of the power of the spoken and written word, as well as their rights.

Legal defence costs are associated with any court proceedings which are the responsibility of either the company or the individual. The PI policy extends to cover these expenses. A further factor to consider is that there have been a number of lawsuits in recent years where the defendant has ultimately been made responsible for costs incurred by all parties.

Covering documents

PI insurance also covers the loss of documents. This refers to the costs of repairing or reconstructing documents, including any related consequential loss, but excludes gradual deterioration. Although there are specific corporate organisations that require this type of protection, it is important to remember that computers crash, fires happen, people delete files accidentally and computer viruses are commonplace.

Understand your risk

Understanding the risk you could be faced with should certain documents be lost or destroyed is critical. PI insurance extends to cover any reasonable related costs incurred when trying to mitigate a loss, for instance, preventing a loss or reducing its severity.

You cannot predict the future; therefore PI cover is an essential must-have in an insurance claim mitigation tool box; particularly if you provide a professional service or advice. This is by no means just another monthly expense; it is a fundamental and responsible cover to have in place.

The fact that the FSB and the public is taking a hard line on mistakes companies can, and do, make should not discourage companies to do their best to service their clients with the peace of mind that a policy such as this is available to protect their business in the event of an error or omission.