As a contractor delivering professional services to a client, you’re expected to provide a minimum standard of care. Chances are you’re being employed by your client because you have a specialised skillset or certain expertise, and they will trust in you to help their business, not hurt it.

But despite your best intentions, sometimes things go wrong. You’re an engineer and you use the wrong measurements in a 3D drawing, costing money to rectify the mistake and causing substantial delays to the project. You’re an editor and you miss a major error in a publication before it goes to print. Or maybe you’re an accountant and you input the wrong information into a client’s tax forms, triggering an investigation from HMRC.

Even if these mistakes were genuine human error and completely unintentional, your client may still have the right to make a claim against you. They expect you to keep them from physical, financial and emotional harm – at least in terms of your working relationship – and if you do anything to jeopardise that, you could be accused of breaching your duty of care.

We call this professional negligence, and while in many ways it sounds similar to ordinary negligence, it has its own unique definition by law.

What is the difference between negligence and professional negligence?

On a day-to-day basis, we are all expected to take reasonable measures to avoid causing harm or injury to others. Ordinary negligence applies to everybody and holds us accountable for our actions should we make a mistake which negatively affects somebody else, such as reversing into our neighbour’s parked car, for example. They sue you because you should have checked your surroundings before reversing and damaging their vehicle. And chances are you’ll be covered by your motor insurance.

As a contractor, it’s likely that you’ll market yourself as having a certain skill set or expertise and your clients will pay for these specific services. It also means you are liable for professional negligence. So if you make an error in your line of work or cause an accident while on the job, even if it was a genuine mistake you could well be breaching your duty of care. You will have fallen short of your clients’ expectations and they may have a right to seek compensation.

What are the elements of professional negligence?

In law, there are five elements to consider when deciding if you are liable for professional negligence. They include the following:

  • Duty: Do you owe your client a duty of care? If something goes wrong, should you have taken certain precautions to prevent it from happening?
  • Breach of duty: You may owe your client a duty of care, but you must also be proven to have breached that duty. Did you fail to take reasonable care?
  • Cause in fact: Were your actions a direct cause of a mistake or injury? If it were not for your actions could an error have been avoided?
  • Proximate cause: This relates to the scope of your responsibility. Could you have foreseen any risks and prevented them?
  • Damages: What actual harm or damage have you caused? Even if you failed to exercise reasonable care in your role this must also result in actual damages and quantifiable losses.

What is a professional negligence claim?

There is a great deal of information in the public domain about how to make a professional negligence claim, but there is not so much about what to do if you find yourself on the receiving end.

In short, a professional negligence claim is when your client seeks compensation against you if they’re unhappy with the service you’ve provided, not received the expected results, or you’ve caused harm to them or their business.  

A claim usually follows a certain procedure called the ‘Professional Negligence Pre-Action Protocol.’ It’s a framework which encourages parties to settle a dispute out of court. You will likely receive a Letter of Claim which sets out the factual and legal basis for the claim against you, including allegations, losses being claimed for and any key documents as evidence. You are then required to acknowledge this letter within 21 days of receipt. After this, you have three months to investigate the claim and provide a Letter of Response which acknowledges the claim, makes proposals for a settlement or disputes the claim.

If both parties are unable to reach a settlement, the case then usually goes to court – a process which can take more than 12 months and may require you to attend to provide evidence before a judge decides on the outcome. Most cases, though, are settled before trial.

How can I protect myself from a future claim?

Contracting is a high-risk occupation. A recent report found that the number of claims brought against limited company contractors is on the rise. How you mitigate your liability will differ from profession to profession, but there are some simple steps you can take to minimise your risk profile. Here are some points to consider:

  • Always aim to act in the best interests of your client
  • Try to warn clients of all potential risks and keep them updated if projects are likely to overrun
  • Maintain a safe workplace
  • Stay up to date on industry news and regulations and be mindful of regulatory changes
  • Only use tools and equipment for their intended purpose
  • Ensure any staff are properly trained and certified to do their job
  • Avoid offering advice outside of your remit or expertise
  • Take care of confidential client data and never share it
  • Take out professional indemnity insurance (read this article for more information).

In certain professions such as accountancy and financial advice, contractors are legally required to take out professional indemnity insurance. But even if you aren’t required to have it by law, most contractors choose to have it anyway. If you don’t and the worst happens, you could incur a heavy financial penalty if a claim is made against you. For many, it’s not worth the risk.

To find out more about our comprehensive professional indemnity insurance, take a look at this page and get in touch with our team of experts to find out more. You can also head to our Knowledge Hub for the latest industry insights.

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