For the majority of professionals, working from home has become the new norm. Aside from the more personal implications of home and work worlds colliding, working from home raises a plethora of risk management issues. Remote supervision, limited access to physical files, documents and often clients, and a general disruption to well-established day to day routines and practices increases the likelihood of mistakes and omissions. It is inevitable that as professionals adapt to new ways of working they will encounter challenges and with it, potentially, disruption to the service provided to their clients. Not all (in fact, not many) professionals will be able to seamlessly make the leap from their pre-COVID-19 practice to a new, virtually delivered business model. For many professional firms generating and maintaining cash flow is the current, urgent focus and understandably so. In times when the focus for many firms is on survival, risk management practices can be neglected.
Professionals have had no option but to adapt in response to the lockdown measures put in place by the Government at the outset of the pandemic. More so now than ever, risk management practices should be reviewed and updated, with new guidance and training programmes provided to staff on topics such as online file maintenance, regulatory compliance with data protection rules and mitigating the risks posed by increased exposure to cyber-fraud.
Added to this many professionals will find themselves with the challenging task of guiding their clients through unchartered territory. COVID-19 has impacted every aspect of business, in novel ways. The performance and enforcement of contracts, in both the public and private sector, has been significantly impacted by the pandemic. In an attempt to avert or reduce disputes in connection with contracts affected by COVID-19, the Cabinet Office in collaboration with the Infrastructure and Projects Authority recently published a document entitled “Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency" which can be accessed here.
This non-statutory guidance encourages fair and responsible behaviour on the part of parties to a contract impacted by COVID-19. This guidance will be welcomed by many but with tough economic times ahead, it is perhaps inevitable that some businesses and individuals may seek to recover their losses by pursuing claims through litigation, arbitration and adjudication. There is also likely to be a rise in the use of alternative forms of dispute resolution such as mediation, which can take place remotely and therefore safely, in accordance with social distancing guidelines.
Recent history has taught us that there is a correlation between recession and claims against professionals. Following the global financial crash in 2008, there was a steep rise in claims against professionals, with many claims being brought on behalf of lending institutions who had suffered financial loss. As we head towards another recessionary phase, it is likely that there will be a resurgence in claims against professionals including solicitors, surveyors, construction professionals and insurance brokers.
The professional, with indemnity insurance cover, should not however be viewed as an easy target in the fall out of the current crisis. The test for professional negligence is a high one. A claimant must establish that the professional has breached his or her duty of care. The claimant must establish that the professional acted in a way in which no ordinarily competent professional would have acted had he/she been acting with ordinary care in the circumstances. "In the circumstances" is a key part of the test. The question of whether or not a professional's conduct / advice was negligent is ultimately a matter for the court to determine with reference to expert opinion. Each case will turn on its own facts. Even if a claimant can establish that a professional breached their duty of care, the claimant must then establish a clear causal link between that breach and their loss. The burden of proof is not one that is easily discharged.
An increase in the number of professional negligence claims against professionals appears inevitable and underlines the need for ongoing risk assessment by professionals informed by professional body and regulatory guidelines. Following the 2008 financial crisis more stringent risk management processes were implemented by many professionals who found themselves exposed to claims. Professionals were reminded of the importance of a written letter of engagement outlining the scope of their engagement and, crucially, any exclusions that apply. Now is the time for professionals to review their current risk management processes and terms of engagement. The Royal Institute of Chartered Surveyors (RICS) recently issued guidance to its members in response to the market disruption caused by COVID-19, which included a Valuation Practice Alert emphasising the need, moving forward, to agree with clients any changes to the way that they would normally proceed with instructions and, crucially, to record the agreed changes at the outset of the instruction, in writing.
Practical guidance has now been issued by most professional bodies and can be accessed via the links below:-
- Solicitors - https://www.lawscot.org.uk/news-and-events/law-society-news/coronavirus-updates/
- Architects - https://www.rias.org.uk/
- Construction - https://www.gov.scot/publications/coronavirus-covid-19-construction-sector-guidance/
- Insurance Brokers - https://www.biba.org.uk/latest/corona-virus-updates/
In such unprecedented times it is only by proactively seeking to manage known risks and continually adapting risk management processes that professionals can seek to limit their exposure to claims. Professionals should also ensure that their own professional indemnity insurers are kept advised of any material changes to their business as a result of COVID-19 and, as always, of any circumstances which may give rise to a professional negligence claim.
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