Defending Professional Liability Claims

Your professional liability insurance policy is a contract that covers you for wrongful acts in the performance of your professional services. Your carrier has two separate obligations to your firm: 1) to defend you; and 2) to pay any judgment for which you are liable because of your failure to meet the professional standard of care for the services you provided. Of course, all of this is subject to the policy limits, and the deductible and all other terms, conditions, and exclusions of the insurance contract. Not every allegation made against a professional, however, leads to a professional liability claim, and not every claim that appears to be related to professional services is based on the duty of the firm to meet the applicable standard of care. It is imperative—and something that is required by the policy—that you cooperate in the handling of the claim. This includes refusing, except solely at your own cost, to voluntarily make any payment, admit liability, assume any obligation, or incur any expense without your carrier’s prior approval.

You may be served with formal legal documents related to a claim—a summons and complaint usually based on established terminology and precedents. A complaint is not proof of a wrongful act. In fact, complaints are often the result of a misunderstanding as to potential responsibility and liability. A complaint also could be part of a nuisance suit—a non-meritorious claim that is little more than an attempt to obtain money or recover costs. The harsh and accusatory terms often used reflect the elements that must be established to prove negligence. The tone, language, and number of allegations may reflect an attempt by the plaintiff’s attorney to induce a quick settlement. An attorney might also make an allegation unsupported by evidence to preserve the plaintiff’s chance to sue on the basis of that allegation if later supported by evidence.

As with any dispute, it is prudent to react to a claim by gathering all client records and project information. This includes organizing any notes or records, correspondence with the client or anyone else about the project, and financial records, including all bills submitted for services rendered to the client. Never alter or destroy original records. The information should be accumulated in a separate claim file that includes all correspondence received from your attorney and from us—this information does not belong in the project file.
Some circumstances and claims are resolved with the assistance of legal counsel appointed by your carrier. The attorney selected to represent a policyholder is experienced in construction law and professional liability defense.  The attorney represents your interests and not those of the insurance company. Even though attorneys are formally retained
and compensated by insurance companies, they are bound both legally and ethically to place their clients’ interests first.

For more on managing claims and Risk Management for Design Professionals please visit here.