Understanding Professional Indemnity Claims

Join Chris Webber, Daniel Webber and Emma Harriott (Woodina Law) as they deep-dive the actual Professional Indemnity claims process and share real-life case studies.

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Good morning, everybody.

Thank you for joining in on this Tuesday morning for a bit of light claims, professional indemnity claims session. We’ve got a wonderful co presenter with us today, and I’ll introduce Emma to you all shortly.

But, firstly, thank you very much for joining us on our professional indemnity claim session.

We’ll be running a two part series on this. It all happened today, but we’re breaking it down. Firstly, understanding the actual process and hopefully taking you behind the curtain, if you will, about what this, what this type of thing is all about, and then we’ll give you some nice juicy case studies. We’ve got four prepared for you. So, make sure you, you know, post your questions in the chat. We’ll take them, take them as we’re going, or we’ll send them to the end just depending on the flow and how we’re going for time, but don’t be shy. Make sure you jump in there.

So joining you today, myself, Daniel, we’ve got Emma Harriott, who’s a senior associate at Woodina Law. Emma’s got over ten years experience in, defending and handling professional indemnity claims both at smaller firms, which is where she is now at Woodina Law, and also large, insurance companies. So very, very, very grateful to have Emma with us as our expert on the panel today.

Expert Introduction

Chris is here. He might not jump on his video, but he’ll be there. He’ll be fielding your questions, and we might get some special comments from him if we’re lucky.

Everybody knows a good session needs to come with a disclaimer. Everybody be aware by now, but we are general insurance brokers. We cannot give you personalised advice in this sort of a forum. Happy to do so offline.
Everything here is general.

Similarly, for Emma, Woodina Law are a law firm with licensed legal practitioners. She is a qualified practising lawyer.

Once again, anything in here is just general.

So don’t run out and take our advice on this specifically, but reach out if you need.

Quick summary here. We’ll go through a few statistics.

The claims process, we’ll try and demystify a little bit for you. I think everybody knows from an insurance point of view, if you have a car accident, you know what to do. You know, to take the people’s details, you know, to take it to a crash repairer. What we’re trying to aim to do in this session is help you understand what you should do and how that whole process works. We’ll go through some case studies. We’ll have a few takeaways and plenty of time for questions at the end.

Polls & Statistics

Just before we get started, I’m gonna throw up a poll, Chris, if you will.

Everybody can vote on this poll when they see it.

Question is, have you had or do you know anyone that has had a professional indemnity claim or notification?

And we’ll keep this open for a little bit.

Interesting to see some of the totals. It’s all anonymous, of course, so don’t be shy. We’re not tracking you and keeping an eye on things. So Wonderful. Alright. We might leave it open for a few more seconds and then close it. That’s nearly everyone.

So, yeah, over a third over a third of people have either had a PI claim or know someone that has had a PI claim.

Two thirds of you didn’t, so that’s good.

Hopefully, you learn plenty from this session.

The statistics that I’m just putting in front of you, part of why we wanted to do this was remove a bit of stigma about professional indemnity claims.

The immediate feeling when something goes wrong and you’re a professional, it’s perfectly normal to feel upset, to feel defensive, even a bit embarrassed because ultimately what’s happening is somebody else is calling into your, calling your professionalism or your ability to do your job into question, whether it’s valid or not.

It’s not a pleasant process, but part of what we’re doing here today is to say, hey. It does happen. It’s not something to be scared of, and it’s probably you know, if you’re in business long enough, it’s more likely than not to happen.

So here’s a few statistics for you. I’ve run a report just for three years.

For professional indemnity claims, this would not be anywhere near matured. This is a very, very small snapshot.

I ran it for one insurer, which is Woodina, which Emma is here presenting with us today. So in the span of three years, we had a hundred and twenty twenty nine note notifications.

Just over half of them are closed, but sixty of them are open, and that’s dating back to twenty twenty one.

So part of what we’re gonna talk about is, you know, it’s not a car accident where you take your car, you get it fixed, and two weeks later, you’re back on the road.

It’s a long process, and it’s fairly involved. So just keep that in mind if you think, jeez. This is taking a while. If you have had a PI claim, it wouldn’t be uncommon for them to last, you know, months or or even years.

Professional Indemnity Claims Overview

Importantly, the amount claimed there, so that’s the amount demanded from these, third parties was over nine million dollars.

That is not not a small amount of money.

So the claims process, when we look at it from your client’s side, and I might throw it to Emma here.

And firstly firstly, welcome to Emma, and thank you very much, for joining us and giving us your time. Very, very fortunate to have you here.

Talk a little bit about, you know, the claims process, and I suppose what, what goes through these third parties or these clients? What goes through their head when they’re considering whether they, you know, send a demand or or make an allegation against another professional?

Thanks, Daniel. Great to be here.

It can vary, but oftentimes, it’s when a client expresses dissatisfaction with your services. It’s as simple as that. It can, it can be a text message. It can be an in person conversation.

They can be disgruntled in some sense. And it’s really how you as the professional and as the expert then handle that dissatisfaction that can then result in a claim.

Really, that sort of, oftentimes, it just starts with dissatisfaction, and it’s not that it doesn’t often present as, you know, you get a formal letter from a solicitor alleging all of the things that you’ve done wrong and demanding a sum of money. It doesn’t often look like that.

So it can be quite informal in the early stages.

Yeah. And I think that that’s really the key in what we’ve seen, and I’ll probably put it to the barbecue test there in the third dot point. You know, initially, these people that have suffered a loss or believe they suffered a loss, their first thought isn’t I’m gonna go get a lawyer.

Their first thought is, you know, I’m gonna chat to, you know, my husband, my wife, my children, whatever, my neighbour. I’m at a barbecue.

Can’t believe this happened.

And it kind of progresses from there. It’s also important to know that you might not not be the target or the subject of litigation. You might just be collateral, collateral to it. So, generally, you know, you’ve provided the service, but I think it’s it’s important to go back to Emma on these points because these dot points and Emma will talk to them a little bit more, but this is probably a natural progression of if we if we call it escalation in how these matters, typically unfold. And could you just talk to us a little bit about what they’re likely to do?

Yeah. Certainly. So, you’ve got a really important point there in remembering that people are often non confrontational.

So they might feel a little bit dissatisfied. They might feel a bit disgruntled, but they’re often not gonna come to you and approach you with this issue directly.
It might be via email. It might be via text message if that’s how you communicate.

Then they’re going to express that they’re not happy with a particular aspect or the whole project if that’s the case.

And then it’s really on you as the expert and as the professional to determine what happens next. So, Daniel mentioned deescalating.

The really, really important point here is to not bury your head when someone raises an issue with you.

You really do have to deal with it.

Otherwise, it’s likely to eventuate and get far bigger and greater than it needs to be.

But sort of coming back to the point of this seminar is really, I mean, I know a majority of you are probably insured with Woodina. Great if you are. If you’re not, that’s fine. You have another great insurer in the background.

But we are open to providing free legal advice when these situations occur and you are unsure, whether it’s a claim, whether it’s something you need to notify your insurer about. Of course, you’ve got your broker. They’re the first port of call that you should talk to about a situation like this.

But oftentimes it’s your response which will necessitate what happens next.

Escalation of Dissatisfaction and Legal Advice

And they might then go and seek legal advice, which could, you know, ultimately result in a letter of demand or a letter to, you know, rectify the issue. That’s a common port of call they have. They actually don’t want damages. They just want the issue fixed.

But then they can also go down the line in point three there, to the professional associations, and make a complaint to a tribunal in that way.
But you know, clients don’t often jump into getting legal advice when they’re sort of dissatisfied or not happy with the service that they’re being provided. That often comes much later.

And what’s your general experience say if you get onto a matter at point one, if you find out about it versus potentially point four, how do you find that those outcomes tend to differ?

Well, they differ greatly, because if we can work with our client, be it an engineer, building designer, any any insured that we have, we can really work with them and try and deescalate the situation.

And, you know, it’s sort of a circumstance at that stage which may result in a claim.

And if it requires additional work or redrafting of plans, then the insured’s can often take those steps at that point.

But once they sort of step down to point four, you know, they’ve sought legal advice.

It’s really hard to then remedy any issues at that point.

It becomes quite litigious.

That’s right. Because you’ve got someone on the other side of the fence that is telling you or or fighting for your rights and knows all the avenues, knows all the levers to pull to to make it heard, that much more. So I think that, you know, if there’s one really big thing that you take away from this session is just understanding that it is an escalation process. And often, based on my experience as well, it would be more unusual for something to start with a solicitor versus start with someone saying, hey.

I’m not happy with this or, hey. You know how you did that? This is what has happened as a result. So I think don’t don’t ignore those initial warning signs.
And that’s a really nice segue into, well, it’s nice to tell us and, oh, Daniel, it would be great to, you know, tell you about all issues. Let’s understand what your obligations are under a professional indemnity policy, and they’re not specific to any one insurer. They are pretty much across the board. Each policy that you have no matter the insurer on a professional indemnity policy will have more or less the same type of wording.

Obligations Under Your Professional Indemnity Policy

They will require you to notify them as soon as you become aware of a potential claim or circumstances that may lead to a claim.

That is really, really, really important because it doesn’t say you need to tell them when you have a claim. You need to tell them when something may lead to a claim or you have a potential claim that that may get worse.

Emma, that’s based on our experience, you know, late notifications, delayed notifications, or otherwise failing to notify tends to be one of the biggest reasons that claims are either reduced or declined.

Is that something that you’ve experienced in your career as well?

Yes. Most certainly. So there is an obligation on both parties in a contract of insurance, and one of them in a PI policy is notifying. So I did wanna make a specific point about this.

If it’s a, the clause often states you must notify. Now if you’re unsure if this is a circumstance which may result in a claim or even if it is a claim, always on the side of notifying. You’re not going to be penalised for notifying the insurer. I’m not sure if this is a claim or not. That’s then on us, as your insurer or in house or solicitor to then consider whether it is a claim, but you should always be on the side of notifying.

We’ll talk about a claim later in the seminar about where an insured’s done exactly that.

Importance of Notification and Claim Handling

They’ve admitted fault, and they’ve attempted to rectify it, and they’ve paid it, and they haven’t notified anybody, and then they’re coming back to the insurer to see how to recover their costs.


So, you know, there’s some list there that you cannot do. So, you know, we wouldn’t recommend that you settle any claim or any even potential claim.

And more importantly, not making any admissions, not admitting fault, despite it it might be very clear that something along the line has broken down or there’s communication or there’s been an error, not admitting that is, probably the most important thing to remember to take away from this because that’s when as soon as they say, look, this isn’t right, and we say, yeah, look, it was my fault. We did x, y, and z wrong.

That’s often what will lead them to then go and get legal advice to seek recovery.

Yep. And, I might just throw out a few questions that are going to be somewhat relevant. So I might throw to Chris Chris quickly, and we’ll get some questions fired up just so we can keep them flowing. Fire away, Chris.


So, specifically, you must notify what’s the time frame for notification?

As soon as you become aware is the time frame in response to that.

So, I mean, it’s not just a text message, hey. I’m not happy with this. It’s when they’ve written to you potentially via email, if they’ve expressed dissatisfaction via the phone, I will say that it’s really important that any of these scenarios are recorded for our purposes. It makes it much easier to deal with when you have a telephone conversation with a client, and you make some notes about that, a file note per se.

And look, it’s the reasonable person test, which is used a lot. You know? What would a reasonable person in that situation do? Not what would the most conservative person on the face of the earth do or not what the, you know, the fastest and loosest person would do? What would a reasonable person do?

You know, you get a letter on, you know, Sunday morning, and you’re not gonna stress if you, you know, can’t get it to the insurer until Monday.

So, yeah, if you’re not sure, the beautiful thing is to speak to your broker. Your broker or your insurance provider is going to be the first conduit before you even get into the claims process.

So part of my job and what we’ll go into shortly is to act as that kind of triage.

So it will often be my decision or my advice as to whether or not it is something that we should notify.

I will be fairly conservative.

So if I’m saying not to notify, I am almost certain that it does not need to be notified. And if it becomes an issue, then that becomes on me. You fulfilled your obligation. It’s our responsibility to advise you correctly.

Policy Period and Notification Timing

Pick up the phone. Talk to me. I would say that I personally handle nine out of ten of our professional indemnity claims here. So, Chris, are there a few other questions on these topics?

Yeah. Just probably the other point to that, potentially around the cutoff time and notification. Can you just talk quickly through being a claims made policy and the requirements at declaration time going to a new policy period?

Yeah. Do you want me to handle this one, Emma, or do you wanna?

Go ahead.

Wonderful. So, claims made insurance means that the claim must be notified during the period in which you find out about it. So if you do work, say, today and don’t find out about it for five years down the track, the policy that you have in place or that period of insurance is the one that will respond to that claim.

So for the purposes of notifying, it doesn’t matter when the work was done provided it happened within the retroactive period.

As long as it’s within the scope of the policy in terms of retroactive, it’s when you notify and when you become aware that you must notify. Now that’s important if you, you know, close your business, if you retire, that’s when it comes into runoff cover that you need to take cover past the date of which you’re working.

I will say on larger projects, oftentimes defects, and let’s be specific, defects don’t eventuate for some time.

So you might have done the work, five, six, seven years ago, and all of a sudden there’s defects that have arisen.

A claim is often when the defects have been identified by the owners, And then oftentimes, they will write to you at that point to say, look. There’s an issue with the stormwater drainage or there’s leakage or there’s something wrong with the cladding or something or other. So a claim is notified at that point.

It’s not when you did the work six, seven years ago.

And at that point, you should notify your broker and your insurer.

And just going back to notifications and whatnot, the statute of limitations is something that gets misconstrued a lot. You know, there’s you do a Google search, what are my statute of limitations, and the search results will come in six years, six years, six years depending on your state or territory and the specific piece of legislation.

Emirates, it’s, based on my experience, it’s not always clear to tell when that six year period starts, and it’s not necessarily when you designed the property or when you provided the professional advice, but maybe when the loss actually occurred?

Yeah. Look. Every state and territory is different.

They each have their own limitation periods, But, primarily, it’s when the loss or when the defect manifested is then the start of that period. So you could have done work eight years ago, but the issue only arose a year ago. So a year ago would be when the loss manifested or the defect manifested, and that’s the time at which, the limitation period runs from. So then they have, depending again the jurisdiction, but let’s just use the broad example of six years. They then have five years from that time to commence proceedings.
So we have thirteen years removed from when you actually did the work.

Chris, I think some of these we’re gonna answer in the case study presentation. So we might just keep posting your questions. There will be time for them at the end, and we’ll keep going if they’re relevant. But a lot of these, we’re gonna cover off either in our case study examples or or as we continue.
We just do one more just so we can clear off from the start so we don’t forget.


The original figure that was posted was the nine million dollars total claims over a hundred and twenty nine notifications or is nine million dollars paid out to the sixty plus that produced the nine point two million was what was demanded and claimed from the one hundred and twenty nine notifications.

The insurer has to date paid out a little over a million, and that’s just in, just in costs, not legal fees, which will be something that we’ll touch on a little bit as well.

Just to just wrap up this slide that we have on at the minute, you’ll see the comment in red. So if you become aware of a situation which could lead to a claim, you are required to use due diligence in doing all things reasonably practicable to avoid or diminish any liability.

Now you might be thinking, Daniel, what you’ve just said there is contradictory. You’ve told me not to do anything.

Now I have to do everything I can to avoid it.


In a matter of speaking, it is treading the fine line between doing not enough and doing too much, and that’s where you need to lean on your advisers, in particular your insurance broker, to know what you should or shouldn’t be doing.

When we talk about, you know, doing things reasonably practicable, we’re not saying you need to, you know, agree to a settlement and defend yourself and do all that. It is okay.

What else needs to happen? Do you need to do additional work to, you know, keep the project moving? What is once again, we go back to that reasonable person.

What is it that you need to do to avoid this issue becoming worse?

The answer isn’t like Emma said to just bury your head and do nothing.

We’ve kind of covered this off.

It doesn’t need to be a letter from a solicitor. It can be a phone call. It can be an email. It can be a letter. You might get a notice from a statutory body whether VCAT, NCAT, or through your association if there’s been a complaint made against you.

All of those can constitute a notifiable event, and require some sort of action on your behalf.

It would be remiss to tell you to take action and then not give you some pointers on what to do or what not to do.

So here’s just four things that you can pretty much do straight away.

And the first thing is, like we mentioned, don’t try and negotiate, settle, or defend yourself. So talk to your broker. Talk to your insurer if you can’t get onto your broker.

You need to start problem solving and consider the urgency of what’s been raised. You know, if I do not take action on this complaint or this issue, is there potential for the matter to get worse? And that goes back to the previous point that we talked about, doing everything you can to, you know, limit or mitigate any further loss, from occurring.

You wanna avoid escalation. Try not to be dismissive.

Like I said, it’s very personal when people attack you professionally even if they’re doing it in a really nice and friendly manner.

I would say the majority of the feelings that we see are, you know, it’s a bit of, you know, sadness, a bit of anger, a bit of embarrassment, and it turns to, well, you know, this is the client’s problem or the client’s unreasonable.

Or it may be a case of, yeah, I know, you know, that that’s not a problem. That’s got nothing to do with me, so you just dismiss it and try not to worry about it.

That’s the worst thing you can do.

Just try I know you have everybody that has those clients that are difficult, that are challenging, that are unreasonable.

They’re often the ones that will cause you the biggest problems. So, yeah, if you could just bite your tongue where possible and seek advice and, you know, give it a bit of credit and then, you know, work it out with the solicitors if required. If not, there are other ways to sort it.

And finally, start collating your information.

If someone’s making an allegation against you and you think it’s baseless or it’s got no merit, start collating the information to support that.

Emma, what’s typically the first piece of information when you write to an insured person, an engineer, a designer, or whoever the professional may be, what’s the information that you’re asking for?

The first sort of request for information, we’ll make that pretty quickly, sort of within twenty four hours after notification.

And more often than not, ninety nine percent of the time, we’ll ask for the contract.

Is there a written contract, or is it an oral contract between you and your client?

And importantly, what we’re trying to look for in that case is what is the scope of work? What were you engaged to do, and what are they alleging that you didn’t do?

Importantly, when we ask for this information, it’s to consider indemnity and also to consider the defence.

So it’s vitally important that any of the plans that you’ve prepared, if you’re planning, or contracts that are saved locally. I know, if you’re working on a larger project, oftentimes the developer will have a document management system that everything gets saved and sent to there. And oftentimes, you forget to save those documents locally.

I’ve had a few instances where the developer has gone into liquidation.
They’re no longer paying the subscription fees, and all those documents cannot be accessed.

So it’s really important that you save your contracts, you save your scope of work. If there are any modifications to the contracts, you save those to a localised file. If there’s any correspondence, if there’s changing of plans throughout the life of the project, which happens often, that any changes are recorded and provided to us following notification. That is really what we’re looking for.

Who were you contracted by? What for? And did it vary?

Now I didn’t even talk to him about this ahead of time, and I’m so glad you brought up contracts because everybody else that’s tuned into our webinars before will know that we talk about engagement agreements and contracts until we’re blue in the face. So you really, really, really, really need to use them, and that’s not from me. You just heard it from Emma who’s an expert in professional indemnity claims.

So just going to the next stage, so, you know, the client’s had an issue, you’ve been made aware of it. What are you doing? What do we do? What are your brokers gonna do?

I mentioned before we act as a triage. So the first thing I wanna do is understand what the issue is. What is the core problem? Not necessarily what is your opinion that will come later is what are the allegations, what is the basis, to the action.

From there, I will typically form a general opinion. I cannot make any decisions on behalf of the insurer, but I will make a general opinion on coverage. And if I believe there are gonna be any indemnity issues, I will tell you about it up front. If you’re telling me about an issue that you found out about two years ago, I will say there is likely to be a problem with delayed notification.

It may be a problem. Whether it eventuates into one or not, that’s a separate story, but I will provide my opinion on what the likely outcome of the policy, and I will tell you if I am concerned because I think it’s important that, you know, as as an insured person, you need to understand where you sit as soon as possible even if it’s informally.

I will, you know, determine whether it needs to be notified to the insurer, decide how urgent it is as to whether we need to get someone on the phone immediately or whether it’s something that we can notify and, you know, wait twenty four hours for a response.

If you’re getting hassled by your clients and wanna send a response, I’ll happily, you know, check over that. Often, that will be just somebody along lines of, yep. We’ve got your email.

Thanks a lot for that. We’ll get back to you, you know, in the coming days with whatever it may be. But just helping you so you’re not admitting liability, offering compensation, and doing all those things that you shouldn’t be doing.

I will then assist to collect the information and, and present it to the insurer certainly in that in that initial phase, and I will relay our discussed course of action, to the insurer, whoever that may be, and and provide my suggestion on on how I think or how from your point of view being the client is to the the matter will be best managed because we’ll talk about, Emma in a second, but sometimes they will assist with drafting correspondence that comes from you. They’re not going to, you know, jump out and start sending letters on legal letterhead if the matter does not warrant that.

And importantly, down the bottom, we’re on your team. So I understand, you know, we’ve got Emma here who’s representing within the law.

We get on very well with Woodina Law, but at the end of the day, we represent your interests. So if the gloves need to come off with Emma, that’s absolutely fine. We’ll do that. But nine times out of ten, that is absolutely not required.
Emma, just mindful of time, I might get you to go through you know, when you become aware of a notification, you mentioned kinda your first step in request for information.

What’s your process when you’re notified?

Well, so often we get a notification from a broker, And at that time, you’ll sort of identify whether it’s a circumstance which may result in a claim or whether it is now a claim.

Circumstances are usually dealt with in house, and by your insurer’s claims team.

They will gather all information needed to determine whether the circumstance, if it results in a claim, would be covered under the policy, at that time, will sort of raise potential issues with coverage, but not often the case in a circumstance. So in a claim, an insurance requires all information to consider indemnity. So are you covered under the policy? Does it trigger the insurance clause? Are there any applicable exclusions that we need to consider?

If a claim is litigated, at the outset, the first notification you receive is from a solicitor saying I act on behalf of the owner of x, and we’re suing you.
Your insurer will appoint a panel solicitor.

A bit different with us at Woodina, we’re an in-house legal team, so we are all practising solicitors. So we will defend the claim, on your behalf, and then we go about investigating indemnity and reporting back to your insurer whether the claim should be covered or not.

If it’s litigated, we also become your defence counsel at that time.

And what we do then is if we need to file a notice with the court saying that you are legally represented, if we need to respond to the plaintiff, again, saying that you’re legally represented, and we’re undertaking investigations, we will go down that route pretty quickly if it’s litigated and no response has been given to the plaintiff to date.

That’s to preserve your interests and your insurers’ interests, and we just sort of put the claim on ice for a moment so we can gather all the information that we need.

The point there in the bottom in red, often without prejudice, doesn’t mean anything to the nonlawyers, but what it simply means is that we’re acting in the insurer’s interests, until indemnity has been decided under your policy.
So our actions will be in your interest, but also in the insurers.

Emma, question oh, sorry to cut you off. You go. You go.

A question we get a lot of, and it’s been put in a chat box and I understand that with matters, there is always a commercial element when we come to fighting versus settlement settling.

When you consider a claim, at what point do you decide whether it needs to be handled commercially or whether you fight? Like, is there a point it be obvious, it becomes, you know, more economical to settle in some cases, but then, you know, designers or whoever it may incur, you know, claims whereas you fight, you win if you’ve got a good case. What are those decisions that are happening behind closed doors?

There’s a lot. So oftentimes, we’ll review the documents that the insured provides us. So what was the scope of work and what were they required to do? And then it takes a different turn.

So did their service fall short of the standard? There’s, you know, Australian standards. Were they compliant? Did they fulfil their obligations under those standards?

You know, is it compliant with code?

Oftentimes, in, you know, larger construction claims, that really requires expert evidence.

But if we’re talking about sort of a straightforward claim, how much is it going to cost to defend this, and should we rather or or then should we instead settle commercially? Now settling commercially is often what we lawyer types call to buy out our costs. What is it going to cost to incur barristers fees, to incur expert fees, and can we just actually settle the claim with the plaintiff or with the claimant instead of incurring those costs?

We’re always trying to reduce exposure for the insured and for the insurer.

That’s our primary job, really.

But sometimes claims more often than not, you can defend claims on a particular aspect, but then potentially one aspect, you know, fell short of the standard. That’s when you’d really look at considering settling.

It’s really the liability sort of analysis in that part that is quite time consuming, and it’s not sort of straightforward.

It’s not the same with every case. It’s not the same with every project. It differs who were the parties involved.

Are there actually other defendants or other designers or subcontractors that we should also be notifying about this claim?

So it varies across every file.

Yeah. I I think it’s fair to say that there is an element of commerciality, if that’s even a word, to these matters. I mean, if a claimant’s, you know, looking for a fifty thousand dollar settlement and the alternative is, you know, a twenty eight day trial that’s gonna cost half a million dollars, that becomes a very easy decision to make.

It’s important to note though that when a commercial settlement is reached, more often than not, I would say probably nine times out of ten, it’s done so without any admission of liability and with a strict confidentiality clause.
Both of those mean, hey. No one can talk about it. No one can slander you.
And there is no admission of fault. So the benefit of that is, you know, no one could talk about it, whereas if you lose a case, it becomes public record. All of a sudden, whatever your business name is in the media or is on public record having made this response, all the court documents, all your dirty laundry can be aired and and is publicly available.

All insurers will make a commercial decision at some point. I have had situations where if we use the example where, you know, fifty thousand dollars will solve it or you can, you know, run through litigation and it might cost ten grand to defend or you might end up losing a hundred and fifty, I’ve seen circumstances where the insurer will, offer a cash settlement to the, to the professional and say, well, this is gonna cost us, you know, fifty fifty thousand dollars. Here’s a check for fifty grand. You’re welcome to go and defend your interest yourself.

If you solve it and you get out of it for ten grand, you pocketed forty. If you cost you a hundred thousand, then you’re in the whole fifty. So, as soon as those offers are presented and when it’s not, when it is your money being spent, I’ve, from experience, found that the outcome is very different. And, yeah, it’s not something that you necessarily agree with, but, you know, speaking from Medina’s point of view, particularly, I don’t find them to be a provider that it’s just willing to roll over without a defence.

They go quite hard. So, yeah, interesting to keep in mind.

Case Study: Building Design Claims

This is a lot of what Emma mentioned just before with reviewing information, with writing to third parties, defending your interests, all that.

So we might move on to some case studies. Now we’ve got four for you, and I wanna keep time for some questions. So we may run a couple of minutes over, but, I promise it’s going to be worth it. And hopefully, you learn a little bit or a lot, ideally.

The first one here, the scope of the project was to provide building designs for an extension and renovation.

That’s what the works included, two story basement and reno to the existing dwelling.

The insured, which was the designer in this case, received a statement of claim regarding the project.

The letter outlined issues with a land survey that was provided by a subcontractor.

Now I know everybody’s going to be loving us talking about vicarious liability and subcontractors because I am very well aware that it is quite a touchy topic, and this is why we’ve included this case study.

It is alleged that the existing dwelling, which was ground floor, had been noted incorrectly on the survey.

The design plans that relied on the survey were incorrect. Difference, two hundred and ninety mil meant that the designs had to be revised and permits and engineering needed to be updated.

The land survey was included in the scope of work offered by the insured who was a building designer to the claimant.

The insured, once again, the designer did not have a formal agreement in place, only emails with the land survey who was the subcontractor.

Now in this case, the land surveyor actually admitted fault and said, yep. I stuffed up. My bad. I’ll pay for it.

But even though all parties were aware that the land surveyor was at fault, the homeowner was in a contractual relationship with the building designer, not the land surveyor.

So they received a letter of demand for a total of one hundred and seventy four thousand six hundred and twenty five for work that they did not do, but they contracted.

Now it was alleged in that statement of claim that the building designer agreed to provide proper land surveys and not merely act for or or not merely arrange for a land survey to act as an agent for the owner.

So importantly there, we talk about subcontracting and being liable for the actions of others.

This one went to mediation.

The land surveyor admitted fault except liability.

The challenging thing when it got to mediation and into litigation was that there’s no formal contract in place, only email exchanges.

And there would have been issues holding the lands of our one hundred percent liable.

So this case was demanded at a hundred and seventy four thousand odd.

Liability was apportioned eighty five to fifteen percent. The total settlement, a hundred and twenty thousand, was split hundred and two for the land surveyor and eighteen thousand for the building designer.

This was obviously quite a time consuming and lengthy process. It ran for a matter of months. The legal fees on that were sixty thousand. So the total cost of that claim was seventy eight thousand.

You can see there by the split, and it would not be uncommon for legal fees to exceed settlement in a lot of cases or at least be equal to.

This one was a redeemer claim, so those legal fees were lower than what we would normally expect on a panel solicitor rate, which means an external law firm.

So that gives you an idea. That is a real example of how you can be liable for the actions of others.

It applies the same for anything that you contract, whether it be structural engineering, soil survey, sample, everything like that. So risk management, if you can avoid getting your clients to contract the other parties directly or if you have to subcontract and make sure you have agreements in place that identify what indemnity they will offer you.

Because in theory, if there was a contract in place with the land surveyor and the contract said, hey. You’re a land surveyor. You’re doing the land surveying. And if your land surveying stuffs up, you’re gonna indemnify us, then in all likelihood, the building designer probably wouldn’t have incurred any, any of that apportionment and would have only been up for some legal fees if they had to defend the initial action.


Easy to happen. Large amounts of money, pretty pretty easily.

Case Study: Renovation Plans and Client Dissatisfaction

This next case study, I’m gonna throw over to Emma.

This is another interesting one, and it relates to plans for a renovation of a residential property. This is often the claim that we see in this space.

So there were plans that were drawn, and the insured, throughout the course of the renovation, changed the design of a rammed earth wall.

And, unfortunately, in this circumstance, I didn’t seek the consent of the client.

They did it because plans had changed and they were, arguably, the, the changes were valid, but they didn’t seek consent of the party who contracted them. The wall was then built, in this property, and, unsurprisingly, the client wasn’t happy with the change.

They then issued a letter of demand, well, but not a letter of demand. Apologies. They, you know, expressed dissatisfaction with the insured.

And, unfortunately, in this circumstance, the insured agreed, and they admitted liability.

And they said, yes. Look. We changed the plan. We thought it would work better, but in fact, it hasn’t, and it isn’t in line with our original plans.

And then they went and offered the client fifteen thousand dollars to rectify the wall, and to keep the project moving.

They did that all without notifying their broker and or insurer, And we got this claim after the wall had been deconstructed and rebuilt, and then the insured came to us looking to get reimbursed for the fifteen thousand dollars.

So it’s a bit of a case study in terms of what we’re talking about before in terms of not admitting liability and not offering to settle any claim. Now in this one, interestingly, it actually worked in both the insurer’s favour, which doesn’t happen often.

We agreed this is another claim, and we agreed that if the insured didn’t rectify the situation, immediately as they had done, then costs of the project would have blown out. The times would have blown out.

And in fact, they did do what they should have done in terms of mitigating their loss.

We agreed to accept this claim.

I will say that’s not an industry wide acceptance. If you admit liability, you’ve breached the insurance policy, and they are then entitled to decline the claim.

But, we sort of saw that what the insured had done in this circumstance was better for the client, for the insured, and for the insurer.

So we ended up reimbursing the insured. Fifth it was fifteen odd thousand dollars that they claimed.

We incurred, obviously, legal fees in investigating this claim.

But I will say that there was an aspect of the claim that wasn’t paid back, which was the insured’s time spent redrafting the plans, and undertaking the additional works.

And that was declined because it wasn’t covered under the policy.

But it’s sort of an example of how you can sort of mitigate your loss, but it’s also an example of what I recommend you don’t do.

Don’t admit liability.

Don’t offer to fix things, at the very least without having a discussion with your broker first.

And in some cases, obviously, Woodina, we might recommend that you do this because it might be the quickest course of action.

But doing all of this without our acknowledgement or without us being on notice of it, we do have some, you know, some clauses, the late notification, for example, that we can rely on or any insurer can rely on to knock this claim back in full.

We obviously didn’t do that, so that’s why it’s an example that we’ve used. But, yeah, the moral of the story is don’t do what this insured did.

But if you have to, do it.

Make the correct decision.

If you don’t tell anyone about it, at least do the right thing, which in this case, you know, all worked out for the better. But as Emma said and and obviously, this isn’t just a, you know, a Woodina session, but other insurers will take a different view. They may take a harder line and look at the policy, which they’re more than entitled to do if you breach the conditions. That means whether or not you acted in the best interest. If you breach the conditions, you breach the conditions.

So, yeah, I like to think that most people will get the benefit of the doubt when they can. So just a real good example of where, you know, doing something is better than doing nothing.

Case Study: Structural Engineering Defects

This third case study was a structural engineer on a residential building, and I say residential building, it was a massive, massive, massive project.

The allegations were that there were deflections in a concrete roof slab.

Yep. Concrete roof slab in a residential area that gives you the idea of the size of it.

Calculation issues with engineering. Now the deflections were alleged to contribute to water ingress in a garage, causing significant damage to a very nice fleet of motor vehicles.

Now the homeowner, in this case, arranged for an independent structural report, which did find some errors in the original design.

They sought legal advice and wrote to the engineer.

Now this one, there is no defence. It was wrong. The structural defects existed. There was no no one else to point to.

Significant rectification costs were incurred. However, the water ingress was defended, and did not appear to be a direct result of the structural issues.

That was supported by expert advice.

The reason I’ve included this one is, it has been running for two years.

Two years haven’t been settled.

Three hundred thousand has been paid to date. I think it’s, there’s more. I think it’s close to half a million, and the legal fees, in the multiples of hundreds of thousands.

This will be a seven figure claim quite easily, by the time it’s all finished. So this one in particular, the building is just basically going ahead with other engineers and whatnot involved, and we’re expecting that being insured at the very end of it is going to receive a bill for many hundreds of thousands, if not millions of dollars to fix what was what was alleged.

So this is a good illustration to the designers on the webinar as to why not to engage structural engineers. When they have claims, they go big, and there is very little defence to them.

And if you subcontracted that engineering, then you would absolutely be subject to litigation as well.

Case Study: Digital Marketing Claim

I’m mindful that we’ve talked a lot about the construction industry.

Most of our registrations or majority, had come from that, but I am aware that we have others. So for the non construction people, I’m gonna throw you back to Emma for our final case study before we get on to some questions.

Thanks, Daniel. This is a really interesting claim. So our insured is a digital marketing company, and they worked with a particular client, who owned a restaurant. I’m not going to disclose where it was.

So It’s not that picture, by the way.

That was just for illustration purposes. It wasn’t even in South Australia, so don’t look at that. It wasn’t Roxy’s for all you.

So, essentially, what had happened so the insured was engaged for digital marketing, obviously, which involved some Google advertisements.
And there were some certain ad campaigns that were posted to Google, and Google had disapproved them.

The insured in this circumstance didn’t notify the client that they weren’t approved, and nothing sort of happened after they were disapproved. So following a period of inactivity, Google removed the ads from their platform.
This was around November twenty twenty two, and I don’t know where you were, but I was held up at home, in isolation at that point in time. So, obviously, there’s a business interruption issue in the background of this one as well.

However, following that, the claimant then issued a letter of demand to the insured saying that their business had subsequently closed as a result of the ads being removed from Google and no one being aware of this restaurant or its existence.

And they sought one point two million dollars in damages from the insured.
This one is a good news story in that we’re able to defend it.

Obviously, the agreement between our client and, sorry, our insured and their client was terminated.

But what we’d found in defence of the claim was that the Google advertisements were actually billed directly to the restaurant owner, and they failed to pay. They failed to pay for the advertisements, and they also failed to issue the disapproval of some of the advertisements. So, you’ll see sort of under section four there, we paid zero dollars to the claimant.

We defended this, and pushed it back onto them. There were some obvious, you know, some defences about the pandemic and its influence on a restaurant going out of business.

But, you know, in doing that, it did cost, I don’t know, I think we’ve listed there, twenty five thousand dollars to sort of undertake all of those investigations and really defend the insured in this claim. So it’s really an example that, you know, while you might be met with a letter of demand for one million dollars, which would obviously cause concern for any business owner, the insurer the insurer is always willing to defend it. And if there are means to defend the claim, we will.

We’re not just going to take the commercial aspect every time when there’s no liability.

Key Takeaways

Yeah. That’s a that’s a good one and and something I actually see, a lot in the building inspection market. I see that occur quite regularly where you, you know, a pre-purchase building inspection, you’ve bought a house, all of a sudden you’ve got termites which, you know, were pointed out, but maybe they weren’t that clear.

And then all of a sudden you think you’re gonna get a free bathroom renovation, so you engage a solicitor and write to the building inspector.

I’ve seen those claims in particular, they get defended vehemently. So, yeah, it’s not always a case of just rolling over and paying money. They are there to defend.

We’re gonna shoot over some questions in a second, but just some three real key takeaways.

  1. Notify your broker, your insurer immediately.
  2. Don’t try to settle or negotiate on your behalf.
  3. If you can, avoid subcontracting where possible. But if you do subcontract, go into it with your eyes open. You’ve got that responsibility to check for accuracy too, you know, if you’re acting as the principal designer or whatever it may be, make sure you’ve got your subcontractor agreements in place as well.


Chris, I might pass over to you if you wanna fire up a few questions. I’m mindful that we’ve hit time. We’re gonna keep it running for probably five or ten minutes longer to go through some questions. So you’re welcome to continue to stay with us, while we fire through a few questions.

No worries.

Alright. So there’s a lot of questions around consultants and how to engage with them and the responsibilities.

We’ll touch upon it very briefly, but what we’ll do when we send out this presentation, we’ll also send out the webinar we did, which specifically we went a good hour or so going through, that topic in particular. So we’re not gonna rehash it here, but we’ll send out our other webinar that we did earlier in the year, in regards to that. But, Daniel, if you just wanna give a quick overview, just around the best way for engagement, with, you know, designers, engineers, how that best works together.

With their subcontractors? With subcontractors. Yeah. Yeah.

So if you want to provide a one stop shop for everything, we’ll use a building designer as an example.

If you wanna be the principal designer that manages the land survey, the structural engineer, and it might be a case because you want control over it because you trust a certain surveyor or engineer or it’s easy because the way in which they present it is good and you’ve got a good reputation. And if you allow the client to go choose their own, they stuff it up. I get that all the time.

That’s fine.

You can do that.

You need to make sure that everybody that you engage as a subcontractor, two things. Firstly, have a written agreement in place with that contractor that addresses the relationship between the parties. I am contacting you as the land surveyor to provide land surveys. If something goes wrong with the land survey, you will indemnify me.

You probably get to engage in an agreement online or speak to a solicitor about drafting something like that. The second thing is to request copies of their insurance.

Get a copy of their professional indemnity policy, their public liability, and their workers’ comp if they if if they’re a company with employees and keep them on file. You then need to set a reminder for the expiry of that policy, say, you know, a week before and request a copy of that. Now if you are extremely diligent, and I would recommend that you do, even if you engage the con an engineer for a project last year, you should ideally be getting copies of their insurances for the subsequent years that you continue. So remembering that if the engineer goes out of business, closes their doors, or doesn’t take their PI, and you get notified of a claim that happened years ago, you are not gonna have any real recourse to push that onto another insurer because they didn’t you know, you don’t have control over what they’ve done with their insurances.

So part of your agreement with them in the subcontractor agreement is you need to maintain professional indemnity for a period of seven years or whatever that number may be following your engagement to us. Now if you’re thinking, that’s a lot just to use subcontractors, and I have ten or twenty different subcontractors. It’s not practical for me to have agreements with them all, or to request their insurance.

That unfortunately is the cost of doing business, and you shouldn’t do it if that’s the case because that is an absolute minimum risk management if you want to engage contractors.

Otherwise, you’re leaving yourself, you know, really exposed.

And I tell you what, you have one or two claims like that, you’ll come uninsurable pretty pretty quickly.

So that was one of the brief questions there was the structural engineer that had the hundreds of thousands of dollars. Yeah. Would they be insurable now?

Great point. Yes. They’ve had renewals offered. This was two years ago. They’ve had two renewals. Their premium went from twelve thousand to sixty five thousand.

The reserve is about one point three, one point four million.

We find structural engineers in particular are one of the higher risk industries, so you have large losses.

Premium goes up. We’ve had other structural engineers that have had, two note two claims and a third notification in a single period of cover.
They were not insurable on renewal. We could not get them cover, except for unauthorised foreign offshore insurers, which don’t meet Australian standards. So, building designers, you know, multiple if you have claims, your premium will likely go up generally regardless of fault, but that is a consideration when they look at it.

But it shouldn’t be as severe as that example I just gave with, with a structural engineer.

So if we go back to the first, the first example that we had there, if they had an engagement agreement in place, would that have made a difference to the client?

So, Emma, that first one with the land surveyor, so they had an agreement they had an engagement agreement with the homeowner. What they needed was a subcontractor agreement.

Emma, had they had had a subcontractor agreement with that land surveyor that had that addressed indemnification for the designer, would that have changed the position on that claim in terms of defence?

Yes. It would’ve.

We would’ve relied on that indemnity clause, and the claim costs or the apportionment, so it was split eighty five to the surveyor, fifteen to the designer, it would have been, that fifteen percent, we would have claimed back from the surveyor. So the claim costs could have been zero had there been an adequate subcontract in play.

The defence costs would have remained the same, probably, the claim costs.
But, yes, the settlement monies would have changed had there been an agreement.

And yes to that question, if you can facilitate quotes for engineering surveying, whatever it may be, for then your client to engage directly, that is absolutely fine.

But I will say sorry, Daniel. Just to jump in. There is a disclaimer with indemnity clauses. In order to rely on an indemnity clause in a contract subcontract, you have to fulfil your duties under the contract, too. So if it says that you will oversee the works or make sure that their works are compliant and you haven’t taken those steps, it makes it difficult then to rely on an indemnity clause. There is always a sort of catch with these indemnity clauses. You have to undertake all of your obligations that are in that contract as well.
Yep. So we’re going back to the scope of work, basically, which is which is key. What were you engaged to do? What were you paid to do? What did your agreement say you would do? And have you done it?

Alright. So just to reemphasize, just so there’s quite a few questions in here with the engagement of subcontractors.

Mhmm. How does that look? Like, just in the real world So we say from the building side, most of these are designer type questions.


When the designer has their clients and you need to get engineers and surveyors and other people involved Yep. What would the correct engagement look like?

Okay. So if I was a designer, I would probably have a short list of preferred surveyors and engineers.

Ideally, I would say, hey. Here’s three structural engineers. Give them, give them a copy of this plan, or I’ll share it with them. You need to request quotes from them, or I would do the introductory.

I would send an email to you know, if, you know, Sally, the structural engineer is, you know, a person I’ve dealt with a lot, I’ll say, Sally, is this an engagement that you’d be willing to consider? Yes. No. Okay.

Can you provide a fee proposal on your letterhead? That would then get sent to the client.

The client would review the fee proposal and confirm or accept whether they were happy with the terms and conditions on which Sally, the structural engineer, was prepared to offer her services.

Then Sally would, you know, drop her agreement. They’d sign a copy of all that, and she’d provide her structural engineering, and she’d probably just give that straight to the designer to incorporate in the plans.

If there was an issue with those structural engineering drawings, both the client and also the building designer would have recourse over the services provided by the structural engineer because they’re both third parties to that, you know, that agreement or contract or that service.

So instead of being the subject of litigation, if there’s a problem with the structural engineering, if the homeowner says, hey. There’s a problem. There’s not enough load bearing in this, you know, trust or whatever, say no worries.

Send that to Sally.

Sally then needs to respond. She needs to notify her professional indemnity insurer because it’s not just the homeowner that’s gonna be coming after Sally. It’s me as the building designer because I have relied on Sally’s specifications for my design, in which case, I’m now not the subject of litigation. I’m also litigating, with the client, against Sally.

So you want to remove yourself from the contracting process. It might seem like a very small change, But the flip side of that, if I sent out an invoice that said I was gonna do structural engineering and then went and engaged Sally myself, if there’s a problem with that engineering, the homeowner’s coming back to me because they don’t have a relationship with Sally.

Okay. Just to dig a little bit deeper on this one and then we’ll move to a different topic.

Can you contract your way out of it? So if you are engaged or working with a subcontractor, can you put it in your contract that you’re not liable for whatever they do?

Can I jump in on this one, Daniel?

Very much an Emma question.

There’s a very short answer to that, and it’s and it’s that you cannot contract out of your own negligence.

Yes. If you had done everything correctly and the other party was negligent potentially, yes. You can contract your way out of it by way of an indemnity clause.

But as I said earlier, you need to make sure that you’re fulfilling your obligations also under the contract, in order to escape liability there. So just remember, you can’t contract out of your own negligence.

This is this is, this is all these questions about contracting, this is great, and this is not new. This has been, you know, been an issue for as long as we can remember. So all these questions and people that subcontract, it’s not it’s not unusual, but, you know, risk management, avoid it, avoid it, avoid it. It’s bad from a risk point of view.

Okay. So just jumping to talk well, we’re talking about the defects and the time period. So a two part question.

Is there a period of time where a claim can be brought?

And then secondary, when you’re closing your business or selling your business, how long are you potentially exposed?

The thing Emma Emma touched on the first part of that just with the statute of limitations, provided an example of did a design something, got built five years later, and it failed.

And then that statute of limitations, whether it be six years, kinda started from then.

Is that more or less the case, Emma?

Yeah. Again, I have to put a disclaimer that it’s different in every jurisdiction.
But using New South Wales, for example, there is a six year time limit from when the defect manifested, but there is a ten year full stop period.

So that doesn’t preclude the claimant or plaintiff from making a claim, but you do have a defence if it’s outside that ten year period is what we roughly would say in a New South Wales claim. It’s different in every other jurisdiction, though.

But there is a final full stop point that it runs from.

And with the insurance question, maximum runoff when you close your business that you’ll be able to get in one hit will be seven years. I’m not aware of any insurers that are offering ten. But after the completion of your seven years, you will be able to buy more runoff cover, if you choose. And that provided you haven’t had any notifications will cost you next door to nothing, but that once again just becomes a risk perception and how you feel about what you’ve got out there with your clients.


Thanks everyone for sticking around. I really appreciate this. I know we’ve run over time, so, it is very much appreciated.

What else did we got here?

Does Webber or the insurer support enhancing terms and conditions for protecting parties involved or is this purely commercial benefit by the insured?

So that will go back to our conversation or our previous webinar, that we had walked through contractual obligations and how that process works. We, as Weber, are not lawyers. We are not able to provide legal advice. However, we do have people that we can provide details to have individual contracts amended, checked, reviewed as well. We do have the ability in some instances to have contracts reviewed. And if you do have a or are wanting to sign a new contract and you want to get some thoughts, your best bet is to send it through to your broker first to then start the process of having that conversation.

The worst possible thing that you can do is to sign a contract without having it reviewed.

Just going back to the runoff questions, there’s a few more in there about cost. We’ll when we send the recording of the webinar, we’ll also link to a few articles that we’ve written. We’ve talked about, and we wrote a blog, I think, last year about runoff, like, how to get it, how much it costs, the general process. So we’ll share a link to that as well.

If you have a potential claim in your insurer bias, they have strong evidence to deny the claim, but you must pay the excess. Does this mean you have made a claim?

Can we not pay the excess by ourselves? If we pay, is the decision ultimately out of our hands?

I will jump in. I mean, I’m not sure who this person is insured with, but at Woodina, because we have an in -house claims model, you don’t pay your deductible until such time as either we have incurred external disbursements.

So that’s barristers fees or expert fees, or we settle the claim. So just because you make a claim or a circumstance, you don’t have to pay your excess. I know that’s different with different insurers, so I can’t comment on any other insurer.

But ultimately, if indemnity has been granted under the policy with a Woodina policy, the insurer has right and duty, which means, yes, they do stand in your place and then they can make decisions about the claim and settle it commercially if that’s what is recommended or ultimately defend it.


Very good.

We might maybe just do one or two more. We might take these and put together, like, some FAQs when we send out.

That might be an easier way of kind of colliding and then and then getting it back. Is there any more that you wanna do, Chris?

Yeah. I can just do a couple.

Just the question about structural engineering runoff. The situation for the uninsurable is the same principle for runoff that it is for actually getting cover.

Yeah. There’s no obligation on the insurer to offer that seven year runoff period. They can choose not to offer it. They can choose to offer it year by year.

So, yeah, if you basically have significant claims, then your runoff is in jeopardy as well.

So just a couple here that I can answer.

Raising a claim against another party. So if I pay fees, does PI support this action? No. That is not, for your PI insurance. That’s for action brought against you. If you need to bring action, get someone else that is yourself and, yes, VCAT, QCAT would be the best port of call for that one.

If you settle a claim out of court, what does this do to your premiums even if you believe you are not at fault?

Daniel, you wanna quickly just answer that one?

Yeah. The circumstances around the claim, whether there’d be fault or negligence or or how egregious the mistake is, does factor into when they underwriter that renewal.

If you’ve demonstrated an absolute reckless regard for the consequences, you’ll find that your premium will be significantly higher.

The claim value and the and the costs are probably more of a waiting to whether or not you did or didn’t have a suitable defence.

So in that situation, your premium is likely to increase even if it was not your fault, but depends on how much was incurred.

The two thousand dollar claim is different to a fifty thousand dollar claim.

If someone refunds their fees, is that considered settling?

Yeah. I saw that question, and I did wanna touch on it. It is considered an admission. Yes.

It is considering acknowledging that you’ve potentially done something wrong and you’re willing to refund them.

I would recommend against it.

I will say that insurance policies do not have cover for refund of fees, but it is often considered in terms of settlement of claims.

And if you have someone that is wanting a refund of their fees, I would recommend first notifying your broker and putting your insurer on notice of that situation.

The only asterisk to what Emma just said there are a few specific policies that do have extension, for mitigation and fee recovery where that action prevents a professional indemnity claim. So that’s not a common coverage, but some of the policies that we have, particularly for the building designers, do have provisions in there for mitigation of loss or fee recovery if that action will prevent a claim otherwise. But if somebody just says, your designs are crap I don’t like, you give me my money back, the answer would be no.

So there’s just a couple of two more really good ones.

So many questions, guys. I’d really appreciate it. I’ve had over fifty here, which has been fantastic.

Just the initial response back says, is it fair just to go back that you need to review your work?

Or if you get that notification from a client, your first response back to the customer or your customer from there is that you need to review it. Don’t say I’m gonna send it to my insurer.

That’d be Don’t say that.

Don’t say that. Speak to my insurer or my lawyer. Just say, thanks for that. I confirmed the receipt, and I’ll get back to you in the next couple of days.

Probably in that situation, Emma, less is less is more.

Yeah. I agree. Acknowledge their complaint. You know, don’t bury your head in that circumstance, but definitely don’t say I’m speaking with my solicitor or I’ve engaged my insurer or the insurer will deal with it. I often see that one.

What claimants then sees the other side with deep pockets and the claim becomes exponentially bigger when you know when you mention that you’ve got an insurer in the background.

So just acknowledge their concern and say, you know, leave it with me or leave it with us, and we’ll get back to you. Oftentimes, in those circumstances, when we’re put on notice, being with Dina, we will assist you in writing a letter in response.

Now we don’t often send that on our letterhead. We will draft it for you, and you can then put it on your letterhead.

So they’re not aware of any insurer and or solicitor in the background. That’s how we often deal with those types of complaints.

And then do you not do you if someone tells you that they’re having a claim or an issue, do you go and contact that client or their client?

Do we?


Yes. Again, just based on what I said, if it’s not litigated, we will try to handle it, with the insured responding.

Those are right.

So they’re not, so they’re not alerted to the fact that there’s a solicitor or that you’ve notified your insurer, if that’s the most appropriate way to deal with it.

But if they’ve responded, if they’ve engaged a solicitor who has responded to us, then oftentimes we will, write directly to that solicitor, notifying that we act and that we’re investigating. So, yes, we definitely, in those initial stages, notify all of the third parties that are involved, the claimant, if need be.


Still more questions coming through. That is fine.

Danny, you probably just need to clarify.
Question comes through. Is Woodina both the insurer and the solicitor?

Yeah. Good point. Two different companies, Woodina Underwriting and Woodina Law. Woodina Underwriting is an insurance agency that places and sells insurance, if you will. And Woodina Law, is a law firm that works, in conjunction with policies placed by Woodina Underwriting, under the same kind of branding and ownership structure, if you will.

But one is a law firm, and one is an underwriting agency. So you’ll probably see the Woodina Law branding when you have a claim versus the Woodina underwriting branding when you look at your policy certificates and documents and things like that.

And with other insurers, it’s generally the underwriting agency or the insurer, and then it’ll be a third party label.

That’s right. It’ll be a law firm that, you know, you’d see in, in any CBD and pay accordingly.

Question, are you comp claims after you switch to another insurance company if it’s professional indemnity?

Daniel, you just need to make sure. Yeah.

So as long as your retroactive date matches or carries over to the new policy, the new insurer is on the hook for all your past work. So, basically, when you leave an insurer and you haven’t been notified, they’re off. They’re they’ve got your money, and they don’t need to pay any claims.

Does Woodina like it when contracts have indemnification for any act or omission?

Well Needs to be fair.

Look. Yes. We like indemnity clauses in our client’s favour, undoubtedly.
The practical implication of those is different in reality, but I would always be on the side of having an indemnity clause as opposed to not having one. But, again, the effectiveness of them also comes back to whether you’ve fulfilled your obligations under the contract as well.

Yep. Very good. And I promise the very last question, everybody. Thank you once again. I often make the first contact with consultants for a quote, which I then send to the client to have them engage the consultant. Sometimes the consultant leaves my name on the project, but the client pays them directly.

What can I do to cover myself better than it seems I am?

So that would be they would engage an engineer and then they put the designer’s name.

Oh, as the recipient of the service. Yeah. You would ideally want the recipient of the service to be the client, not the not the designer.

I Emma, it’s probably Who’s contracting who comes Yeah.

Look. It depends who the quote has been issued to. If the quote has been issued to the client directly, then oftentimes the contract will form between the client and the consultant.

If you, as the designer, have the quote has your name written on the top, then oftentimes you are the contracting party. So, to be clearer with that, I would probably ask that your consultants name the clients as the contracting party on their quote and any agreement that you subsequently enter into or they enter into.

And if they ask you why, say, I don’t want liability for your work.

Be honest. Like, that’s the reality of it, and they would understand that. So, well, great session. I’ve yeah.

We’ve run well over, so thank you very much everybody for sticking with us. Emma, amazing. Thank you so much for giving up a lot of your time, in the lead up to this presentation and to jump on now.

Chris, thanks again. Everybody that attended, we’ll send out a copy of the recording along with, we got through all the questions, so we won’t have too many FAQs, but, a few links to stuff about runoff and and a few other things we touched on, other recordings, other sessions.

Keep an eye out. We’ll be running more sessions, throughout the coming months and the rest of the year. So, I really love that everybody jumped in, and thanks a lot. Have a wonderful day.

Key Takeaways

  1. Notify your broker or your insurer immediately.
  2. Don’t try to settle claims or negotiate settlements yourself.
  3. If you can, avoid subcontracting where possible. But if you do subcontract, go into it with your eyes open. You’ve got that responsibility to check for accuracy too, so if you’re acting as the principal designer or whatever it may be, make sure you’ve got your subcontractor agreements in place as well.

PI Claims FAQs

What is the first step I should take if I become aware of a potential professional indemnity (PI) claim?

Notify your insurer as soon as you become aware of a potential claim or circumstances that may lead to a claim. Do not admit liability or offer to settle without consulting your broker or insurer.

How important is it to notify my insurer about potential claims or circumstances?

It is crucial to notify your insurer promptly. Failure to do so may result in the reduction or denial of your claim​​.

Can I settle a claim or admit fault without informing my insurer?

No, you should not settle any claim or admit fault without informing your insurer. Doing so may breach your policy conditions and result in the denial of your claim​​.

What is the difference between a potential claim and a formal claim?

A potential claim refers to any situation that may lead to a claim, such as a dissatisfied client. A formal claim involves a legal demand for compensation due to alleged professional negligence.

What is a 'claims made' policy in professional indemnity insurance?

A ‘claims made’ policy means that the policy in effect at the time the claim is made (not when the work was done) will respond to the claim, provided it falls within the policy’s retroactive period.

What should I do if a client expresses dissatisfaction with my services?

Acknowledge their concern and notify your insurer. Avoid admitting fault or discussing potential settlements with the client directly.

How does the statute of limitations affect PI claims?

The statute of limitations varies by jurisdiction but typically starts when the defect or loss is discovered, not when the work was performed. It’s important to understand the specific limitations in your area.

What are the consequences of late notification of a PI claim?

Late notification can result in the denial of coverage. It’s essential to notify your insurer as soon as you become aware of any potential issue.

Can I contract out of liability for subcontractors' work?

While you can include indemnity clauses in contracts with subcontractors, you cannot contract out of your own negligence. Ensure proper agreements are in place and fulfil your obligations to manage risks effectively.

What is runoff cover in professional indemnity insurance?

Runoff cover provides protection for claims made after a business has ceased operations or a professional has retired. It’s essential for covering potential future claims related to past work.

How do legal fees impact the total cost of a PI claim?

Legal fees can significantly add to the total cost of a claim, sometimes exceeding the settlement amount. It’s crucial to manage claims effectively to minimise these costs​​.

What should I do if a subcontractor is at fault in a PI claim?

Notify your insurer and provide all relevant documentation, including contracts and communications with the subcontractor. The insurer will determine the liability and manage the claim​​.

How should I handle documentation and communication related to PI claims?

Keep detailed records of all contracts, scope of work, communications, and any changes throughout the project. This information is vital for defending against claims.

What factors influence the decision to settle or fight a PI claim?

Decisions are based on liability, cost of defence, potential settlement costs, and the strength of the defence. Insurers aim to minimise exposure while considering the commercial implications.

How do PI claims affect my insurance premiums?

PI claims can lead to higher premiums, especially if there is evidence of negligence or significant payouts. However, the impact varies based on the claim’s specifics and how it was managed.

Managing Contract Risks

We had a lot of questions around consultants, responsibilities and how to engage with them. For more information on this topic, check out our previous webinar on Managing Contract Risks.

Watch Managing Contract Risks Webinar
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