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Steps to Avoid or Mitigate a Professional Negligence Claim – Commercial Litigation

professional negligence claim

Detailed legal tips for professionals on how to avoid or mitigate a professional negligence claim, by Commercial Litigation solicitor Georgia Taylor.

It’s every professional’s nightmare to have their work called into question by a client and for that complaint to lead to a professional negligence claim. Such a claim can be taxing for the professional accused, even if it is false. Professional negligence claims without merit take considerable time and expense to deal with and resolve. Attwood Marshall Lawyers have for years fought to defend professional negligence claims. In many cases, the blame for bad advice can be shifted onto the client and their conduct, or lack thereof, throughout the duration of their dealings with the professional. All professionals must take into consideration their fiduciary duty to the client and their duty of care when assessing the potential liability of a professional negligence claim.

Here are our top tips to avoid and to mitigate a possible professional negligence claim.

  1. Know your duty of care

The starting point for a professional negligence claim is for the party claiming to establish that the professional owed them a duty of care. Duty of care is not difficult to establish where there is a contractual agreement in place. In the absence of a direct contract, it is more difficult for a person other than the client claiming to establish that a professional owed them a duty of care. However, in some scenarios, a duty of care can arise to third parties without the professional having intended this to occur.

Standard of care and breach of duty

Professionals such as accountants, insurance brokers, and financial advisors, hold a duty of care to their client which is higher than the average man-to-man transaction. Professionals are trained, practised and qualified to advise on matters in their respective fields, that in the ordinary course a ‘lay’ person would not have the requisite knowledge of. Certain minimum standards of skill and care are required of professionals, and such standards are usually set and required by their respective industry and governing bodies.

In a professional negligence claim, the party claiming needs to prove that the professional performed the services to a standard below what would be below what is expected from his professional peers in the same circumstances.

Useful risk measures and tips to honour your duty of care:

a) Know your clients business: It may seem simple, but in many cases professionals have slipped over a minute or ordinarily unessential detail which then caused their otherwise sound advice to have a detrimental effect.

b) File notes: Detailed file notes of telephone conversations and in-person interactions are an excellent tool in many cases to mitigate the possibility of a “he-said-she-said” evidentiary nightmare. Usually used in the legal profession, these notes are untapped claim reducer for other professionals who are frequently giving advice in person and/or over the phone. This tool is also an excellent way to document your file and review the advice you’ve already given the client should a client ever question your work.

c) Confirmation in writing: If you’re unsure your client has understood the advice given over the phone or in person or you’re generally wary of the client and their conduct, it’s important to follow up your oral advice in writing with reference to your recent meeting or phone call. This is to show that you not only provided them with advice but to document the exact advice they’ve received.

d) Risk Management: Assessing your risk areas and identifying ways to improve cannot only reduce insurance premiums but your steps in doing internal audits or external assessments can identify risk files before they become an issue.

e) Professional Development: Professionals must keep an eye on the law and its inevitable changes. It is important not only for your business to know and access changes but keeping with the times will reduce your risk of liability should your expertise be called into question.

f) Know your limits: As a professional who gets called on to provide advice in all aspects of business and personal affairs, the forefront question at the forefront of your mind should be “is this my area of expertise”. When a client seeks advice from you about an area you’re not familiar with or an area you don’t practice in (such as law) you should refer their question to an external referral source you trust. A client will no doubt appreciate your candour in assessing your professional scope and further receive the comprehensive advice they need.

2. Check your insurance

Professional indemnity insurance can save your business if ever you’re caught with a claim against you. Like any insurance policy, indemnity insurance can have strict notification time frames, huge premiums and payout limits which can all contribute to making an already stressful process of a professional negligence claim more difficult to deal with financially. It goes without saying that the insurance that you have brokered must be the correct policy for you and your firm.

READ MORE: Has your professional negligence claim been rejected by your insurer? – Commercial Litigation

3. Know your rights

Mistakes are bound to happen, but you can control the extent they affect you and your business by taking the following steps:

a) Notify your insurer: As discussed, insurers have strict time limits and conditions when notifying them of a claim. Ensure all your staff members and colleagues know about your insurance time limits and conditions of your policy.

b) Seek legal advice: Whether legal advice is provided by your insurer or not, seek it as soon as possible. You must identify your error and what impact that may have had on your client and what steps you could take to reduce their loss. It is important in any claim for the claimant (the person claiming the loss) to ‘mitigate’ their losses. If you can assist the claimant in fixing the problem (before it’s known to them) it may reduce the total sum of the claim, or prevent the claim itself.

c) Protect yourself: As you’d know, there are a variety of business structures that reduce or wipe your personal liability if a business goes south. In cases of professional negligence, claim amounts are unlimited so seek the correct advice on the structure your business should take before engaging any client.

If you wish to seek advice from any one of your commercial litigation lawyers or commercial lawyers, please do not hesitate to call Amanda Heather, Department Manager & Senior Paralegal on direct line: 07 5506 8245 or email: aheather@attwoodmarshall.com.au.

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Georgia Taylor

Georgia Taylor

  • Lawyer
  • Commercial Litigation
  • Direct line: 07 5506 8253
  • Mobile: 0423 842 969