Over the last two decades, the average value of a Professional Indemnity (PI) claim has skyrocketed. Numerous factors influence PI claims and their value, ranging from an increased awareness by third parties of their legal rights to claim compensation, escalating legal costs, increased regulation of professionals, as well as the state of the economy.
Undisputedly so, negligent errors and omissions do creep in during the rendering of professional services amongst all our professions, hence the need for professionals to have adequate PI insurance in place.
There is still an alarming number of professionals that are of the view that insurance cover is not necessary.
Profession with the highest claims
The engineering profession, being such a vast array of disciplines, remains the profession with the highest number of claims (both in frequency and severity) in the built environment.
Claims multiply where professionals assume obligations in addition to the discipline that they are involved in. This can be seen in the claims against architects, which increased sharply especially where the architect was also appointed as the principal agent by the employer. There is a growing tendency to hold the principal agent liable for the poor workmanship of the other contractors/consultants. Similarly, when acting as project manager, the professional is responsible to ensure the project is performed on time and on budget. There has been an increase in claims, in respect of budget overruns.
To minimise this risk, professionals should ensure that their contractual obligations and limits are clearly spelt out.
The lack of a written contract between the professional and the employer or the incorrect contract being used for the professional services to be rendered, especially in the building industry, often leads to unnecessary disputes and associated legal costs.
Intermediaries still fall foul of their obligations by failing to place cover according to the client’s instructions, a failure to do a needs analysis and failing to point out relevant exclusions on the policy.
Claims and reputational harm
Advancement in the digital world over the years and, recently, more reliance on technology by businesses to operate remotely during the pandemic made our professionals vulnerable when it comes to cybercrime and, especially, increased phishing related claims had been observed. Unless specifically included, cybercrime does not fall within the ambit of a general PI policy. Attorneys, accountants and brokers remain the targets at greatest risk for these criminal syndications.
The poor state of the economy has resulted in many of the more experienced professionals emigrating or retiring, leaving a large skills gap in the professional environment. At the same time, due to the scarcity of work, professionals are taking up work outside of the specific expertise and tendering for projects under budget and assigning junior and inexperienced engineers to complex projects. The result of this is claims and reputational harm.
As we now welcome a “new normal” with lockdown rules becoming something of the past, the number of construction and infrastructure projects should increase. As our professionals become involved in new projects and resume those that were put on hold during lockdown, the claims will pick up momentum again.
Standards for professionals
The various professions’ regulatory bodies aim to ensure that the professions remain in high regard and set certain standards for the professionals. This, together with the awareness by consumers of their rights, results in more complaints made against professionals. Where the complaint has a direct relevance to any potential or actual professional indemnity claim, most professional indemnity policies provide cover for associated legal costs.
Finally, the law is always evolving and therein imposing increasingly more onerous obligations on all professionals to carry out their services or work to the highest possible standards, to protect the public. The net effect of this is that we will see an ever-increasing number of claims arising against all professionals.
Helena du Plooy (B. Proc | Admitted Attorney of the High Court of South Africa)
Claims Specialist (Professional Indemnity)
SHA
