PI guidance in midst of 'perfect claims culture' - Professional Indemnity Insurance

23/10/2009

Written by Robert Bass

In the current turbulent financial climate, professionals of all backgrounds may wish to bear in mind that the likelihood they will be made a target of legal action will rise. Indeed, as the economic crisis rumbles on and businesses fail and costs are cut, market sources suggest that in a bid to recoup money they have lost, both individuals and businesses will look to "shift the blame" and file claims against organisations and professionals that they have worked with.

In such circumstances, Professional Indemnity (PI) insurance can offer vital protection. However, in an Accountancy Age article, the source points out insurers are increasingly examining the terms and conditions of their policies to check whether the individual circumstances of the case will allow for protection to be given.

Such comments could be a particular area of consideration for professionals as "a perfect claims culture is created".

And those looking for protection from their PI insurance product were urged to look at the timeframe which the policy demands they notify their insurance provider should they become aware of a potential problem. When informing insurers of such cases, professionals were also advised to be as clear as possible about what is happening to them as well as the reasons behind why they have become a claim target. Indeed, being late or sending an incomplete notification statement can see some - if not all - of a claim be rejected.

It is recommended professionals provide as much assistance as possible by co-operating with insurers and any parties they are working with while an investigation of the case is underway.

Advice should be sought from insurers and brokers by those unsure how to proceed when faced with a claim. However, one thing that should never be done is to make an admission of liability or offer an apology. Should this be done, whether it is made directly to the client or to a third party, the chances of an insurer being able to provide full PI protection for the case could be under threat.

In addition, professionals should be ready to provide copies of all background documents relating to the claim. This should include contracts held with the claimant as well as records of communication between the two parties.

However, such steps should already be followed as a part of a "stringent risk-management process". Some say there is no better cure than prevention and professionals are advised to produce formal documents setting out the exact details of the guidance and instructions that they have given, defining the client's responsibilities and the relationship between the two parties.

Perhaps of equal importance, there are a number of things that professionals should not do when facing litigation claims. Among these are avoiding making reference to the claimant about having PI insurance in place.

Taking action to agree a settlement, making payments or any other measures that could incur costs with regards to a claim without first having written consent from an insurer is also to be discouraged. Such steps could be seen as an admission of guilt or liability and ultimately result in a policy becoming invalid.

Such guidance could prove to be of particular assistance to accountants as Victor Knope, an adviser to the Institute of Chartered Accountants in England and Wales, told Accountancy Age earlier this year that as the recession rumbles on clients are turning on such professionals and "questioning the advice they were given on deals".

In comments made in February, he suggested that the cost of PI insurance for accountants was to rise as businesses attempt to file claims against them in their efforts to recoup money they have lost.

Click here for more information about Professional Indemnity for accountants.

Click here for more information about Professional Indemnity in general.

PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2009 Adfero Ltd.

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