The Small Business Owner’s Guide to Professional Negligence

It can be a small business owner’s worst nightmare: a client or customer suffers a financial loss at the hand of your work. That, in essence, is professional negligence.

In detail, professional negligence can arise when a person has misrepresented themselves as having more than average skills and abilities – if they are a professional, qualified person and have provided inadequate advice or improper conduct and as a result, the client or customer has lost out financially. Professional negligence can also come down to an error or omission – as simple as not putting a decimal point in the right place or missing out a crucial bit of information in a report i.e. you know the correct details but fail to report on it.

As professionals, we are legally bound to exercise reasonable skill and care when dealing with clients. If we fail to do this, and our mistake was one that another professional working in the same field would not have made, and the client lost money as a direct result of the mistake, then they are liable for damages and we may be guilty of professional negligence.

Negligence in my mind comes under the remit of ‘do your job to the best of your ability because your reputation depends on it’. But it’s worth knowing a little more because no matter how many years experience we have, mistakes can happen. It’s also useful to know more about this not only for our own professions, but for occasions when we hire others to work with or for us.

In order to claim for damages, the ‘victim’ (or client) would need to establish the “existence of a duty of care” on the part of the professional, and that this duty has been breached. Evidence of financial loss as a direct result of that breach of duty is also necessary – and it is only possible to claim for losses that are reasonably foreseeable.

If you are claiming for professional negligence, it might be advisable to seek the advice of a Solicitor who can offer more information on the necessary procedures. There is a protocol for claiming against professional negligence: the ‘victim’ needs to correspond directly with the negligent professional in question by themselves or via a solicitor and issue a Letter of Claim. The letter should include:

  • A chronological summary of the case
  • Allegations against the professional
  • Confirmation of whether an expert has been appointed

The negligent professional must acknowledge receipt of the letter within 21 days of receiving it, and has three months to investigate the matter.

Get covered with Professional Indemnity

It might be wise for professionals to take out Professional Indemnity (PI) insurance. It’s this that will cover the legal costs and expenses incurred when defending a claim. It also helps to cover and defend against “Alleged Professional Negligence” as there are still costs involved in defending an unfounded allegation. PI can also cover loss of documents or data, unintentional breach of confidentiality or copyright, defamation and libel, loss of goods or money (your own or for which you are responsible).

Professional Indemnity insurance is a requirement for many industries such as accountancy, engineering and surveying. Contracting professionals such as management consultants, business consultants and IT contractors may find they require PI in order to be awarded a contract, join trade bodies or offer their services via government schemes.

The Insurance Octopus provides Professional Indemnity insurance and a wide range of add-ons. Get in touch for more information!