PROFESSIONAL RISK EXPOSURE
The single greatest financial risk for Access Consultants is exposure to a claim for compensation arising out of alleged professional negligence.
Impact of Claims
Claims, regardless of their outcome, can have significant adverse effects on a professional’s business and personal life. They are typically:
- Costly to defend: Legal fees and associated costs can escalate rapidly.
- Time-consuming: Managing a claim diverts significant resources and focus away from core professional activities.
- Stressful: The process creates substantial personal and professional stress.
- Reputational: Allegations of negligence can damage professional standing and future business prospects.
- Financially Catastrophic: Without proper insurance, a successful claim for compensation can result in significant, and potentially business-ending, financial implications.
TYPES OF CLAIMS AGAINST ACCESS CONSULTANTS
Claims brought against Access Consultants generally fall into two broad categories:
1. Financial Loss Claims
These claims arise from allegedly negligent advice or service provided by the Access Consultant that results in a quantifiable monetary loss for a third party.
- Who brings the claim? Usually brought by a Developer or Building Owner.
- What is the basis? The consultant’s advice is alleged to have caused a financial detriment, such as requiring costly remedial work, project delays, or breaches of statutory requirements that necessitate expensive changes to the design or construction after the fact.
2. Personal Injury Claims
These claims stem from circumstances where the Access Consultant’s advice is alleged to have negligently caused or contributed to someone’s personal injury.
- Who brings the claim? An individual who has suffered an injury.
- What is the basis? The injury occurred in an environment or structure where the consultant’s advice on accessibility was followed, but was allegedly deficient, leading to an unsafe condition (e.g., advising on ramp gradients, tactile ground surface indicators, or doorway dimensions that are later deemed non-compliant and hazardous).
Financial Exposure and Duration
From an insurer’s perspective, the potential quantum(financial size) of these claims can vary widely, ranging from minor loss to multi-million-dollar demands, especially in personal injury cases involving permanent disability. Claims can have a significant duration, often taking years to resolve. Furthermore, a claim against an Access Consultant may involve other parties with whom they have a commercial relationship (e.g., architects, builders, certifiers), leading to complex multi-party litigation.
The Professional Indemnity Insurance Product
Professional Indemnity (PI) cover is key to protecting Access Consultants and their business from the types of professional risks and claims outlined above.
PI insurance provides a crucial financial safety net, covering legal defense costs and any resulting damages awarded in a claim arising from an act, error, or omission in the performance of professional duties.
KEY ASPECTS OF PI COVER
Limit of Indemnity
This is the maximum amount the insurer will pay out under the policy for all claims in a single policy period. Choosing an adequate limit is vital for absorbing defense costs and potential damages.
Period of Insurance
The timeframe the policy is active for, typically 12 months.
“Claims Made” Cover
PI policies operate on a “claims made” basis. This means the policy must be active at the time the claim is first made against the consultant and reported to the insurer, regardless of when the negligent act or omission actually occurred. This contrasts with “occurrence” policies.
Premium
The cost of the insurance. The pricing for PI insurance is influenced by various factors, including the consultant’s scope of services, claims history, and broader market conditions (e.g., “soft market” pricing cycles versus “hard market” trends).
INSURANCE PITFALLS AND CLAIM DENIALS
Understanding common reasons for claim denial or coverage issues is essential to ensure your PI policy functions as intended when you need it most.
Common Reasons Claims Are Denied
- Failure to Notify a Prior Known Circumstance:If an Access Consultant was aware of a situation that could reasonably be expected to give rise to a claim before the policy period began but failed to disclose it to the insurer when applying for or renewing the policy, a subsequent claim arising from that circumstance may be denied.
- Failure to Consistently Maintain Cover (Gaps):Due to the “claims made” nature of PI insurance, any gap in continuous coverage can leave the consultant exposed. A claim made during a period without an active policy, even if the work was done previously, will typically not be covered.
- Inaccurate Business Description: The policy must accurately capture the full scope of professional services the consultant provides. If a claim arises from a service that falls outside the defined professional business in the policy wording, coverage may be contested.
Common coverage issues often revolve around the policy wordings, exclusions, and the interpretation of the professional services provided.
KEY TAKEAWAYS: BEST PRACTICE FOR ACCESS CONSULTANTS
Adopting best practices in both professional services and insurance management is the most effective way to manage professional risk.
Client Engagement
Carefully define and document your scope of work. Ensure your engagement contract accurately reflects what you are agreeing to do, and be wary of scope creep—providing services beyond the agreed-upon contract without formal documentation and adjustment.
Record Keeping
Maintain robust and detailed record-keeping practices.Claims can be brought many years after services have been provided, necessitating the ability to retrieve all relevant advice, reports, and communication from the time of the project.
Insurance Coverage
Have appropriate insurance cover in place that is suitable for the size and complexity of your practice. Critically, ensure you maintain continuous cover for the duration of your potential exposure to claims (even after you cease trading).
Policy Review
Carefully consider and understand the policy you have obtained, including the limits, deductibles (excess), and exclusions.
Claim Management
Do not be afraid to notify a potential claim or circumstance. Have an open dialogue with your broker, insurer, and any appointed defence lawyer when a claim situation arises. Prompt notification is often a policy requirement.
For more information please contact our office:
03 9557 7400
www.archicover.com.au
Julien O’Brien – [email protected]