• Negligence arising from a Breach of Professional Duty due to an act, error or omission
• Fraud and Dishonesty of staff
• Libel, Slander or Defamation against a third party
• Loss of client documentation
• Legal liability for damages and claimants’ costs/expenses arising from the act, error or omission/civil liability of the “Company’s” employees
• Wrongful or inadequate advice to client(s)
• Acting without proper instructions from the client
• Failure to act in accordance with client’s instructions or at all.
• Failure to advise client
• Breaches of Trade Practices Act/Fair Trading Legislation- misleading or deceptive
• Breaches of Statute – eg; Corporation Law or  Consumer Credit Code

Do not believe it could happen to you?

An innocent Building Designer

This matter is a very good example of how a person can be dragged into litigation, even though they have done nothing wrong. It also emphasises the importance of having Professional Indemnity Insurance.

Mr Richard Roberts, was a building designer. He prepared some plans for the second floor extension of a holiday house which included a staircase with landings and no winder. These plans were preliminary drawings for the purpose of obtaining a permit. They were not intended to be final working drawings.

The owner of the property subsequently carried out the renovations, but did not use the staircase designed by Mr Roberts. The staircase was changed by the builder to include a winder.

After the extensions had been completed, a family stayed in the holiday house. Early one morning the grandmother offered to take an infant from her mother. The grandmother took the baby and carried her down the stairs to the ground floor.

In walking down the stairs the grandmother stumbled on the edge of a step at about the point of the winder. She fell in the darkness of the early morning. Unfortunately the baby’s head hit the floor and he suffered brain damage. The baby’s parents’ sued the grandmother on the basis of her negligence in failing to switch on the light so that she could see where she was walking down the stairs.

The matter became very complicated because the grandmother’s lawyers and insurer decided to join the builder, the firm which constructed the stairs, and our insured. The insured was alleged to be negligent because he had not designed enough risers in the drawing of the stairway in the first place.

At the commencement of the proceedings it was attempted to have the claim struck out against their Insured on the basis that there was no proper cause of action. The insured had nothing to do with the design of the staircase that was ultimately installed. Unfortunately this motion failed as the judge said that although the prospects of the claim against their Insured appeared slim, the case should be allowed to go to trial.

The case was then listed for trial to determine liability only.  The trial went for two weeks. The judge found in favour of the insured in relation to the design and construction of the stair case. The grandmother was found liable for not switching on the light.

The Court ordered that our Insured’s costs (which by that stage were approximately £190,000) be paid on an indemnity basis.

Mr Roberts had this to say about the claim:

“Having notified insurers of a possible claim against me, they immediately arranged for Lawyers to look after me and nurse me through the traumatic period that followed. 

I can honestly say that, for the last two and a half years, I have received nothing but courtesy, understanding and help from both companies. 

I have never experienced this claim situation before and trust that I will never go through it again but, I can sleep easier in the knowledge that I am supported by an Insurer who I feel is second to none and an exceptionally competent and professional legal team whom I would not hesitate in recommending to anyone.”.

Examples of Claims for Loss of Documents

Many people ask me, what would a claim for loss or damage to documents that you see usually as an extension to a Professional Indemnity policy?

These must be documents owned by a Third Party that are in the insured’s physical custody and control. A claim for a loss must arise where a third party has suffered some financial loss and it is not intended to cover an insured’s own loss.

An example can be an Architect who releases to a builder, his sole copyright/ownership in his architectural drawings of a multi-storey office block as per an agreed contractual arrangement. The drawings may stay with the insured until completion of the project.

But what happens if the Insured suffered a fire at the premises and did not keep a back up copy off site? There could be a long delay in the construction of the building. The builder could argue that he had suffered a direct financial loss arising from the destruction of his documents (the architectural drawings). He may seek compensation from the insured for the subsequent consequential loss caused by the interruption to construction of the project.

A similar example can be an Accountant who holds on to all the original receipts of a client while calculating his tax owing for the previous financial year. Perhaps he has a Storm causing water damage coming through the roof destroying all the paperwork. The Third Party may need to go to considerable expense in obtaining replacement copies from his own suppliers etc. He may seek compensation from the Insured for these additional expenses caused by the loss of the documents held in the Accountant’s care, custody and control.

Not a common claim but worth having the extension as it is usually free.