What is professional negligence?
If you’re about to sign a contract to supply a service to your client, they may have stipulated that you need a minimum level of professional indemnity insurance. This cover protects your business against allegations of professional negligence from your client - but what exactly is professional negligence?
Every professional owes a duty of care to their client and is expected to offer their services to a high standard with reasonable skill and care.
So when a professional fails to meet the standards expected of them – or is perceived to have failed to meet them by a client – a claim for professional negligence may arise.
The Supply of Goods Act 1982 implies a term into the contract, that the professional will perform the service with reasonable care and attention, meaning that there does not have to be a specific clause in the contract stating the level of service expected. However, in practice it is always advisable to fully define the roles and expectations of each party within the contract, thus limiting the chance of ambiguity.
Naturally, there are too many scenarios that can lead to a professional negligence claim to list them all here, however a snapshot of claims we see are below:-
- Failure to complete a project on time or as agreed;
- Poor business strategy recommendations;
- A breach of confidentiality or copyright;
- Unintentional loss of documents and/or data;
- An allegation of a libelous or slanderous comment;
- Errors in a design drawn up by the policyholder.
An example of a professional negligence claim
One of our customers was contracted to implement an IT system for a new client. Terms and objectives were agreed, which were ultimately met by the IT consultant. However, their client decided that the new system operated too slowly and claimed that our policyholder had been professionally negligent. We were able to investigate the issue and offer guidance to the IT contractor, analysing all documentation in order to help them prove that not only had all of the agreed terms and objectives of the project been met, but that most of the performance issues were caused by hardware (supplied by another professional) rather than the new software. In the event, a greatly reduced claim was paid, with all costs covered by us as the insurer (except the excess).
Defending professional negligence claims
As these this example illustrates, professional negligence claims can arise even when you have performed a service to the best of your abilities, and often from circumstances that are entirely beyond your control. Even if you have done nothing wrong and you feel your client's claim is speculative, you would incur legal costs just to defend the claim to prove that you hadn't acted negligently. The point to take away from this is that even the most experienced and careful professionals should consider professional indemnity insurance to protect themselves.
Read our guide 'What is professional indemnity insurance?' to find out more about how professional indemnity insurance can protect you and your business, or get an online quote in 90 seconds now to arrange cover from as little as £6 a month.
What about negligence claims concerning directors?
While professional indemnity insurance protects against professional negligence claims, proceedings are increasingly being brought against the individual directors of the companies that have provided a service. In this instance, you should consider arranging a separate cover know as directors and officers insurance. It covers a wide range of scenarios; from the legal costs and damages where actionable mistakes have been made, through to paying for legal representation at the policy station in the unfortunate event of a director's or officer's arrest.
One of the most surprising directors and officers claims we have been involved with involved the directors of a care home. They wished to have some old and potentially unsafe trees on their land taken down, and so had them surveyed by a tree surgeon to ensure that not only was this necessary, but that no birds were nesting in them. The report explained that there were not any birds nesting and the trees were subsequently cut down. A complaint from a member of the public followed, alleging that there were in fact birds nesting and that cutting the tree down was illegal. This led to police attending the site and arresting the policyholder's directors. In this case we instructed a well respected national firm of solicitors to defend the directors, which did so successfully, and all charges were subsequently dropped. However, without a directors and officers insurance policy in place, the entirely innocent directors of the care home could have faced heavy fines and even community service orders. Find out more about directors and officers insurance or read our guide 'what is directors and officers insurance?'.
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