Defending a Professional Indemnity Insurance claim

Find out how our team's hard work resulted in a £160,000 decrease in final settlement.

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The situation

A firm of surveyors received notice from a customer, a very large construction firm, that they had discovered that a sewage drain was placed incorrectly on an in-progress site, allegedly due to errors in the drawings produced by said surveyor.

The construction firm’s solicitors asserted that the misplacement of the sewage drain would result in significant costs, stemming from:

  1. Postponement of planning permission
  2. Impact on the wider programme
  3. Redesign of the building layout
  4. Re-involvement of the stakeholders

The construction firm’s representatives estimated the total value of their claim to be £250,000.

Our response

The claim was received by the Romero Insurance Brokers’ claims team and notification made to the client’s insurers. The surveyor’s insurers immediately reviewed the claim submission and concluded that it failed to satisfy the Pre-Action Protocol for Professional Negligence claims, thus meaning that the claim as presented was not valid. We were therefore not obliged to adhere to the timescales set out by the claimant’s solicitor. This enabled us to have more time to investigate the matter despite pressure from the construction firm’s representatives. 

The insurers appointed a firm of solicitors to respond to the claim submission, setting out why their claim was at that time invalid and requesting further substantiation of their allegations and costs. 

The firm of solicitors liaised with ourselves and the client to seek advice on the validity of the allegations and to collate relevant documentation. An independent Quantity Surveyor was also instructed to provide their views on the allegations submitted and the work undertaken by the client. 

Following consideration of the claim by the solicitors and the QS, it was concluded that the claim was valid, but that the costs submitted were inflated. Following negotiations, the solicitors were able to conclude the claim for £90,000, almost a third of the value of the original cost submitted. This amount was paid by the insurers.

The conclusion?

Put simply, this case demonstrates the importance of having suitable Professional Indemnity Insurance cover in place. 

There would have been many consequences if the firm of surveyors had not had this level of protection in place: 

  1. The firm of surveyors may have reacted too quickly to the robust legal approach from their customer’s solicitors.
  2. The cost of the defence solicitor and any associated legal costs would be the responsibility of the client (the firm of surveyors).
  3. The assistance of a Quantity Surveyor may not have been engaged – even if they had, the client would have had to bear all costs relating to this.
  4. The claim may not have been able to have been negotiated downwards, leaving the client having to pay up to £250,000 in damages out of their own pocket.

Can we help protect your business?

Having an experienced insurance broker on your side might be key to getting the right level of Professional Indemnity Insurance for an affordable price. With the market hardening and insurers reducing their capacity for this risk, it’s important to work with professionals who know how to present your risk. And, if things do go wrong, it’s imperative to have a dedicated claims team on-hand to fight your corner. 

Find out more about Professional Indemnity Insurance here

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