In the third of a series of articles looking at professional indemnity claims, Marcus Elwes passes on insurers' tips and hints on how to avoid complaints being made in the first place.

Professional negligence claims can never be totally avoided. Even if the judgement and advice you give is sound, well recorded and backed up with evidence, there will always be clients who seek recompense for what they perceive as a wrong done to them.

But by observing a few simple practices, suggested by RICS listed insurers, you can successfully defend a negligence claim and minimise the possibility of one arising in the first place.

Put your files in order
The chances of successfully defending a PI claim are much better if it’s supported by thorough, clear and chronological documents.

However, the prospect declines sharply if such evidence is absent. So you should:

• Keep full and detailed file notes and records of all conversations, meetings, site visits and so on
  • Record all recommendations and advice given, and instructions received – and how you exercised professional judgement
  • Record comparable evidence used, and why you felt this evidence was relevant and reliable
  • Use a template file note or checklist for completion, while inspecting the property
  • If any assumptions are made, these should be clearly highlighted  to the client and recorded
  • Keep a clear and complete file and be aware that claims take time to materialise (often three to six years) – good written records, safely retained, are invaluable.

It’s all in the contract
These days, it’s essential there is a formal agreement between you and your clients, about what both parties expect to be included in the service and, more importantly, what is not.

Formal contracts are still relatively rare outside the construction industry, but letters of engagement or formal terms of business are a must.

As a result, insurers say you should have clear terms and conditions, and ensure there’s no ambiguity in client expectations.

Also, you should use proper letters of engagement or retainers, and stick to the agreed brief. And have a clear agreement on the scope of the work, ensuring any deviations are clearly brought to the client’s notice and documented.

Precise language in reports is vital. Avoid making life expectancy estimates as clients will use these as quasi guarantees; if you can’t inspect part of a property, say so, document it and make clients aware of any other limitations in reports.

It's also reasonable to use limitations of liability within agreements.

Stick to what you know
Don’t be tempted to step outside your area of expertise in order to impress a client, as this could create problems later.

Instead, call on colleagues and associates for their expertise, such as with peer reviews (particularly in valuations and estate agency).

Also seek or recommend specialist advice on areas where expertise may be lacking (such as solicitors for rent reviews) or which can’t be covered by inspections (such as asbestos).

You should check documentation is authorised by appropriate staff. Use RICS guidelines and consider quality control audit on valuation procedures, in particular to ensure you’re meeting Red Book practices.

And never comment on an area outside your expertise, even informally.

Stay in control
Negligence claims often result from poor management. Good management isn’t an easy skill to acquire, but insurers advise:

• Ensure you’re adequately staffed and resourced to carry out the work 
• Avoid excessive workloads that might cause rushing and mistakes 
  
• Communicate with clients and monitor ongoing issues, especially in project and property management 
  
• Be aware of who your client is and  from what areas claims might arise 
  
• Ensure fee levels (particularly panel work) are sufficient to enable appropriate investigation 
  
• Avoid areas expertise where you don’t have relevant knowledge: tell clients when you can’t do something 
  
• Don’t handle claims yourselves – involve your insurers at the
   first opportunity
  
• Make sure there is one appointed senior person responsible for dealing with all negligence claims and complaints 
  
•  Keep a register of everything, ensuring your internal procedures, ISO 9000 certification, diary systems and checklists are up-to-date and relevant.

Do your homework
A lack of knowledge can swing a negligence claim: it’s difficult for insurers to refute it where the surveyor's advice has been wrong.

Insurers recommend that, aside from ensuring your technical knowledge is current, you’re aware of the common causes of claims when carrying out work and drafting reports, and that your background research is thorough, particularly in the area of valuations.

Avoiding all claims is easier said than done as there are many factors beyond your control.

But if you stick to the agreed brief, note variations, and keep proper files, most claims can be successfully defended.

Marcus Elwes is a consultant for Miller Insurance Services, which provides management and consultancy services to RICS.

This article appeared in RICS Business, September 2006.