The Gazette 1979

GAZETTE

SEPTEMBER1979

How to avoid Professional Negligence Claims Dennis A. Marshall, Solicitor, Partner Barlow Lyde Gilbert, London, and Vice-President of The Law Society of England and Wales. (One of the 1979 Blundell Memorial Lectures, sponsored by the Royal Institution of Chartered Surveyors and the Senate of the Inns of Court and reprinted by kind permission of the Bar of England and Wales)

other the total cost of claims against the members of any Profession has ultimately to be borne by those in practice, merely leaving the allocation of that cost to be agreed by individual firms with their Insurers or with the Professional Body on their behalf. A further problem is that it has been said on numerous occasions that the realms of negligence are never closed. Looking back over the last ten years or so this is very true of the professional negligence area. Until Hedley Byrne v. Heller & Partners it was understood to be the law that a professional firm's liability arose entirely out of the con- tractual engagement, and that only those in contractual relations had a claim against the firm for damage or loss suffered through negligent performance of its duties. That position was widened by Hedley Byrne establishing for the first time a duty of care to others than those in con- tractual relations where a duty of care had been assumed, although, of course, that extension was subject to the ability of the firm to give an express disclaimer of responsibility. Furthermore, since it has been understood that the professional firms' liabilities arose out of breach of contract, it was believed, it now seems erroneously, that a limitation defence could be relied on when six years from the date of the breach of duty had elapsed, irrespec- tive of whether or not any loss had then occurred. Subsequent decisions have established that the pro- fessional firm has in fact a dual duty in contract and in tort and that accordingly even if in contract a claim may have become time barred it can still be pursued in the event of negligence being established whereupon the limitation period is extended until six years after the date the loss is suffered arising from that negligence. Effectively, therefore, a professional man is on risk to be sued for many years after he has retired from active practice, and he is well advised to ensure that he is protected against late claims arising in this way. From the foregoing general comments it seems plain that if the cost of claims and of insuring against them is to be reduced from the present figures regarded by some as unacceptably high, there has to be a reduction in the number of claims. These, even though only small in number compared to the total transactions carried through by members of any one Profession in a year, are nevertheless too high. The purpose of the first part of this talk is directed in purely general terms to attempt an analysis of the cause of claims and to suggest some methods whereby they may be reduced. The cause of claims The following comments are based on personal experience of handling claims of this type over a con- siderable number of years. They may not be universally accepted, and I am sure they are not complete, but they may help to focus on the main problem area. Many believe that the most serious cause of claims is

To consider usefully the question of prevention of claims for Professional Negligence, it is necessary to understand how the present situation has developed and why there has been a dramatic increase of claims of this type agains most Professions over the last seven to ten years, and also to review the steps taken by the Professions and their Governing Bodies to face up to the challenge of this changed state of affairs. Connected with this is the whole range of insurance protection and the way in which the Insurance Industry have been prepared to provide insurance cover agains liabilities in all cases of unlimited extent to which professional persons and firms are exposed. The reason for claims The consumer-inclined society in which we live today seeks compensation for loss which is believed to have been suffered through acts or omissions of Governments, Local Authorities, and indeed all those who provide goods or services to the public, and unless compensation is forthcoming an outcry is likely to occur. A good example is the "That's Life" programme on television, and in such a climate many feel that limitation or exclu- sion of liablity for professional services should be the last line of defence of the professional firm. There is the further point which many professionals appear to over- look, that the main purpose of their existence is to provide a service by expert advice and actions for the public engaging their services, and should professional firms be unwilling or unable to back up their engagement with compensation for services negligently provided, then a large question-mark is raised over their usefulness to society as providers of that service. One lawyer employed by a large public company in its legal department remarked not so long since that in his view professional advisers were there to be sued. This may sound singularly unattractive, but it is nevertheless true of the conditions in which we are all living and practising today. From the point of view of Insurers, professional negligence is not an attractive form of business to many. Insurers regard the Risks of what they term "long tail" insurance as unattractive because of the uncertainty, probably for a number of years after a Policy has been written and a premium paid, as to the ultimate cost to them of settling the claims arising under that insurance. It must be self evident that in this field it is usually impossible when a claim is made to quantify the cost of that claim, even if the question of liability is reasonably clear. With continuing inflation and the uncertainty of the amount involved in claims arising in any particular year, it is perhaps not surprising that Insurers find it difficult to get their calculations right, and tend, therefore, to err on the cautious side by requiring relatively high premiums for the Risks which they believe they are running. The Professions cannot expect others to bear on their behalf the losses which they incur, and in some way or

181