Negligence claims against professionals like financial advisors, doctors, accountants, and surveyors have been on the rise in recent years. The interesting fact is that this number will continue to grow due to an increased reliance on the advice of professionals, raised awareness of amongst people of their legal rights, and the increasingly complex nature of work carried out by professionals in various fields.
So far, only medical practitioners were believed to be at the receiving end, but even a displeased client can sue his auditor for filing a wrong statement of income. On similar lines, a lawyer or an architect can just as easily be taken to court.
The following are the negligence claims that can arise:
- In the case of medical practitioners, a major decision taken can lead to losses for the patient. In such a situation the doctor becomes liable for full or for the part of the loss suffered by the patient.
- Similarly, design negligence can be caused by an architect while making the structure plan for a building. For example, the builder may realize that it is risky to build beyond a certain number of floors. This is an example of a designing error by the architects working on that project.
- A lawyer may give wrong taxation advice to his client, ultimately causing loss to the client and being sued by him.
- A financial advisor may miss-sell endowments, pensions, bonds, and other financial products.
- A failed litigation resulting from the poor legal advice delivered by solicitors or barristers.
- Property transaction issues and conveyance negligence.
- A lawyer taking years to settle a claim which should have been settled way before, resulting in a negligence claim.
In fact, in today’s world, any professional who renders skillful advice and services to people can be sued for negligence and omissions on their part. The cost of this can be exorbitant. The one saving grace is that the extent of financial damage is considerably lowered if the professional has opted for the professional indemnity insurance or errors & omissions insurance.
Importance of errors & omissions insurance:
Regardless of the experience that the professional has, there is always a possibility that one can make a mistake due to negligence. Hence the insurance is critical when the professional,
- Handles client’s data
- Advice clients
- Provides professional services
- Is responsible for the client’s intellectual property
An errors & omissions insurance covers many scenarios like:
- Professional negligence
- Unintentional breach of confidentiality
- Unintentional breach of copyright
- Defamation and libel
- Loss of data
- Loss of money
The scope and nature of the cover provided depend on the profession. However, errors & omissions insurance does not cover for:
- Illegal acts
- Intentional damage
- Act of terrorism
- General liabilities not part of work
It has profoundly become vital to have an errors & omissions insurance policy as per the requirements of the business. Professionals need to remember, “Anticipating mistakes isn’t easy but, protecting oneself is”.
Case Study:
Dinesh, a 35-years-old Estate Agent, resided in Chennai and for a corporate firm involved in the business of appraising and valuing properties. In June 2017, Dinesh valued a client’s house, after which it was subsequently placed on the market for sale. He also advised the client that the property will be sold in no time considering the current market situation. He also suggested him to search for some commercial properties for setting up small grocery shops. As advised, the client anticipated a quick sale and purchased two properties.
However, it later came to light that the house had been over-valued. Since the price was placed above the market value, it had no buyers for a long time. Finally, after a long delay, the house was sold at a lower price than initially anticipated.
The client had to suffer massive losses due to this miscalculated advice by Dinesh. To recover the losses the client filed a suit against Dinesh. Luckily for Dinesh, the company had the professional indemnity insurance policy in place. The policy successfully helped to settle the claim by settling for a loss of bridging finance and other expenses incurred.
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