Professional indemnity claims can be complex on many levels. They usually involve a threat of legal action or a client recovering money from you. Sometimes they involve both of these things.
It’s perfectly normal to feel stressed. Possibly even afraid. Most people aren’t used to having a legal threat made towards them and assume the worst outcome, but most of the time your client is full of hot air.
If your client is claiming a monetary loss there can also be the added stress of where you’ll find the money to pay for that loss.
This is your professional indemnity policy’s time to shine, so let’s go behind the scenes of a typical claim.
The process of filing a professional indemnity claim
It all begins with collecting the necessary information the insurer requires. With Jack is here to help you gather the information we need to submit to the insurer, but if you want to compile this alone you’d be expected to include;
- Client details
- An overview of the situation
- The monetary loss (is your client asking for X amount in compensation or have they threatened you with legal action?)
- Dates the project commenced (the insurer will need to confirm you were insured when the work started)
- Your policy reference so that the claims team can refer to your coverage
- Contracts between you and your client
- Email or text conversations to show what’s happened and can strengthen your case
Once these details have been submitted, you can expect a response from the insurer within 12-24 hours to acknowledge they’ve received your first notification. At this point your claim will be allocated to somebody in the team who will review everything.
Professional indemnity claims can be complex. Depending on the severity of the claim it can take a few days for the insurer to look over all of the material you’ve submitted, review the situation internally and form an understanding of what’s happened. They may contact you with follow-up questions just to fill in any gaps.
Ultimately the insurer is looking to see if:
- the situation has triggered policy coverage
- it’s happened within the policy period
- what the next steps should be
This can be a worrying time whilst you patiently wait, but part of our role at With Jack is to check in with you, see how you’re feeling and offer moral support. Feel free to reach out for support at any point.
You might also want to send your client a holding email at this stage. A holding email is a short reply to acknowledge receipt of their claim, and that you will be in touch with a more substantial response in due course. It’s important not to mention insurance at this stage.
After the insurer has reviewed everything we’ll hear if the claim has triggered policy coverage. If so, the insurer will outline what they think the approach should be. This is a chance for you to agree or push back on anything you’re not comfortable or happy with.
This can be a collaborative process between you and the insurer. They can outline the best course of action based on policy coverage, but it’s OK for you to highlight your feelings and any actions you’re not comfortable with.
Depending on the context and severity of the claim, the insurer may appoint lawyers to deal with your client directly. In less severe cases the insurer can instruct you on what to say in response to your client’s claim. Every situation is different and assessed on a case-by-case basis, but the end goal is ensuring you feel supported.
In rare cases the freelancer is hopeful of salvaging the relationship with their client as best they can. In that instance it’s probably a good idea to avoid lawyers dealing with them directly. Instead the lawyers would help you communicate with your client by instructing you on what to say to minimise liability and steer you towards a good outcome.
A real behind the scenes account of a professional indemnity claim
Let’s dive into a real situation that happened to one of our customers. I’ll talk through the steps as well as the outcome.
In this situation the client refused to pay the developer’s invoice for work that had been completed and was threatening to “take things further” if the freelancer didn’t build extra features for free. We commonly refer to this as scope creep.
Initially the lawyers instructed the freelancer on how to reply to their client. The ideal outcome being that the client would pay the invoice and drop the threat of legal action.
When it became obvious the client wasn’t going to cooperate and was becoming more threatening, the lawyers began dealing with the client directly.
It took several weeks of negotiations between the lawyer and the client. Ultimately the insurer paid the freelancer’s invoice they were owed under the mitigation costs clause. This is because the cost of fighting the claim would work out higher than the value of the invoice itself, which was £9000.
This solution was on the basis the freelancer wouldn’t be looking to recover their fees from the client and the project would be considered at an end from everybody’s perspective. The lawyer helped the freelancer receive this conclusion from the client in writing.
The mitigation costs clause is one of my favourite policy features. If your client is dissatisfied with your services, refuses to pay your fee and threatens to bring a claim against you, the insurer will pay you the amount owed to you if it’s possible to settle the dispute with your client by you agreeing not to press for the disputed amount; or if they believe this will avoid a claim covered under this cover for a greater amount.
The goal with professional indemnity insurance is to make sure the freelancer is in the financial position they should have been in prior to the loss.
This outcome worked well for the freelancer. They were delighted to not be out of pocket for the work they’d done, and to have the support of lawyers helping them stand up to their difficult client when they became threatening.
We often highlight that one of the benefits of being insured is showing clients you can’t be pushed around. Yes, you may be a small outfit, but you have a team of people behind you when you need it.
Being insured means you don’t need to:
- shop around to find the right lawyer, which can be even more challenging if the jurisdiction of the claim is outside of the UK
- find a lawyer who specialises in the area the dispute is in—contract law, copyright infringement etc
- pay expensive consultation fees
You’ve had the legal protection of working at a big company, and the insurance has also helped to solve the non-payment issue.
To recap, here’s the behind the scenes account of a professional indemnity claim.
- Professional indemnity claims can be complex because they involve a legal threat or request for damages and require lawyers to negotiate. They often take time to resolve
- To get the ball rolling with a claim, you’d want to provide details of the situation, what the monetary loss is, contracts and any communication to strengthen your case
- It usually takes several days for the insurer to review the material you’ve provided and debate things internally
- If your claim is covered, the insurer will appoint lawyers who will either deal with your client directly or inform you how to respond to them
- The lawyers will negotiate with your client to reach an agreement. Hopefully you’ll be happy with the outcome too, but the ideal outcome is to ensure you’re in the same financial position prior to the loss
