The risk of professional liability has been enhanced as remote working becomes the ‘new normal’, according to risk and insurance specialists BLM.
This warning comes as the UK government has now made a major announcement on social distancing rules, reducing the current guidance from 2m to 1m+. This move will necessitate government carrying out a balancing act between business and health concerns. What is clear is that the workplace will never be the same again, with more and more employers considering the long-term benefits of working from home. For a large proportion of professional services firms, it will become standard operating practice.
What challenges does COVID-19 and the new way of working have for the business community?
Graeme Moore, Partner and Head of Professional Indemnity at BLM’s Belfast office comments:
“Times of uncertainty and change inevitably result in greater exposure for businesses, and in the current climate there will almost certainly be attempts by individuals and companies to recoup losses from professional advisors.
“Decision-makers need to be aware of this and reduce liability by implementing risk management procedures. Staff may have to cover an area of the business they lack experience in, confidential data could be exposed on home devices, and reduced communication between teams could hinder services provided - these are just some examples of how a business may be increasing its liability risk.
“Companies who offer professional advisory services such as design consultants, accountants, financial advisors, and property professionals will all be under the spotlight as the pandemic brings with it greater scrutiny of decision making.”
Some of the areas identified as at particular risk are as follows:
- Design and construction services - It has been well documented in the press that firms will face challenges in both practical and economic terms in ensuring that social distancing standards are maintained and that workers are supplied with the relevant personal protective equipment (PPE) to protect their staff and clients. In addition, design professionals will be live to the challenges that remote working brings, particularly the inability to carry out site surveys. This could result in greater use of assumptions instead of reliance on measurements and visual inspections.
- Accountants – As accountants try to navigate their clients through this difficult economic period and implement business support measures, they face risks of tax advice claims over flawed guidance. This is particularly so in the fast-changing market, with rules and guidance being updated on a regular basis.
- Financial advisors - Financial markets are extremely volatile adding increased risk to financial advisors and investment losses will likely see a rise in mis-selling claims. The current situation will inevitably make it more difficult for professionals to value funds properly and to divert funds appropriately from problematic investments in good time. Asset managers will need to monitor closely the geographic and economic effects of the outbreak, take appropriate steps and protect investments. It will be incumbent on the professionals to document any steps they may take in response to the economic impact, to show a clear trail in order to justify any actions they take for clients.
- Surveyors - With the housing market anticipating a slump in house sales and price volatility, it is expected that property professionals such as surveyors and estate agents will face disruption to the market and need to be prepared to embrace change and ensure clients are sufficiently protected to avoid liability.
- Insurance brokers – Following the lockdown restrictions, clients have complained to brokers that their insurance policies do not cover them in respect of Covid-19 related losses. This is particularly so in relation to Business Interruption cover, perhaps not surprising since it is usually contingent on property damage (not an effect of the virus). It is not yet clear how much of an impact this will have as there is litigation ongoing in England in relation to Business Interruption cover involving a number of insurers. However, more than ever brokers need to document their decision-making and review policies for clients where Business Interruption cover would be required, to ensure that the cover is as wide as possible.
- Legal advisors – Law firms with staff on furlough would need to take particular care when dealing with caseloads for colleagues, ensuring clients are supported and that supervision is appropriate at an increased time of remote working. This will ensure that transactions are carried out with proper checks and balances.
“These industries were already most prone to professional liability claims and the changes brought with remote working have dramatically altered their service delivery. That is why thorough risk management procedures must be implemented to ensure that processes are still being carried out properly.
“Generally, the impact of any major changes to working practices would normally take some time to result in a dispute, possibly months or even years. However, businesses must act now to ensure modifications in their service delivery are not increasing exposure to liability. This will likely entail reviewing workflows and processes, assessing the suitability and security of IT systems, and importantly ensuring that suitable insurance cover is in place. As the economy reopens, all of this will be of critical importance to the service industry.”