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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)
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
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
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