CPD: Back to basics

Underwriters, brokers and insurance professionals of every discipline should regularly review the fundamentals to minimise their exposure to claims. This is often a matter of following good practice and common sense rather than using detailed Quality Assurance (QA) procedures. Claims usually arise from mundane and predictable situations and so can be largely prevented. Yet this requires a focus by management on areas of risk across the firm rather than purely on the perceived `profit making' activities.

The firm's standard contract of employment should oblige staff to disclose all

matters relevant to professional indemnity (PI) claims, with failure leading to disciplinary action. Continuous professional development (CPD) must be maintained and resourced by internal and external seminars and other methods. CPD should also be

covered within regular (six or 12-monthly) staff performance appraisals, along with other areas of career development. It is also essential to develop a culture of openness regarding problems.

Management
The importance of a clear management structure and the systematic supervision of staff cannot be overstated. The firm should maintain an up-to-date, centralised office manual or QA system as a source of reference. The checking of a junior staff member's work should involve a real input into the work done and not a simple signing off. There should be effective procedures for fostering communication between staff - upward and downward. Another vital tool is a properly resourced library with procedures for the dissemination of legal/contractual/product information.

There should be a clear procedure for reporting matters relevant to the PI insurance and staff should be aware of the need: to promptly report all matters that may develop into claims; to avoid making any admissions as to culpability and to know when they are out of their depth. Staff should also be encouraged to be wary when third parties ask them to confirm matters and/or to see their files as a claim may be brewing. Finally, prior to each renewal of PI policy, principals should ensure enquiries are made of each member of staff to elicit details of any known claims or problems that might give rise to claims.

Office procedures
It is absolutely vital to keep proper records. Insurers cannot defend cases without proper documentation to back them up. File notes should be signed and dated and must be contemporaneous (the practice of compiling file notes much later and backdating them may question the integrity of all records). If handwritten notes, such as telephone notes, are allowed to go on files, they should be on proper notepads or standard forms giving details of, for example, the caller and the time, date and substance of what was said and advised.

There should be procedures for date-stamping incoming post and a partner or director should be given responsibility for reviewing incoming and outgoing post, including faxes and emails.

Finally, there should be a proper system of archiving and retrieval. Files should be kept for a minimum of 16 years. If necessary and if possible, the document imaging of files should be given careful consideration. However files are archived, they should be adequately secured against fire and theft. Deed and document insurance is available but it cannot replace a missing note or letter that may prove crucial to a claim.

What enquiries does the firm make about potential clients? How does it deal with negative feedback, that the client in question is known to be difficult, claims conscious, or likely to dispute fees? Is there provision for the firm to carry out financial or `grapevine' checks? Further, is the firm clear as to the legal identity of the party that it is dealing with?

There need to be procedures to monitor the amount of work in progress and received payments. Disputes about fees often escalate into PI claims. Is the firm clear about advising clients if and when additional chargeable work arises? This may also provoke disputes.

The firm should aim to contract on a written standard agreement that covers the scope of the services and the fees. It is important to make sure the standard terms are clearly accepted by the client, ideally by them signing them.

Even if professional services are undertaken on the basis of a simple exchange of letters, there should be a provision for suspending and terminating the employment, both on reasonable notice and if there are outstanding fees.

Has the firm attempted to put a ceiling on its liability (for example £100,000) when undertaking professional appointments? These may be subject to challenge under the Unfair Contract Terms (1977), but may still be enforceable and reduce the claim value.

It is important to have a proper complaints procedure to ward off potential claims. These should, ideally, provide for review by another partner or director (or the principal) and agreed action within a set timescale to deal with complaints.

The firm should have a clear policy with regard to communication with clients and should insist staff adhere to it. This should include guidance as to when a comprehensive file note should be made and in what circumstances detailed letters of advice need to be issued.

It is vital to record specific instructions from clients in writing. Particular problems arise in relation to emails and faxes where the speed of response does not allow for proper consideration or checking.

As a general policy, the practice should not be keen to enter into liability for others' acts. Ideally there should be a proper written sub-consultancy agreement. Sub-consultants' qualifications, expertise and level of PI cover should be checked before they are appointed.

Question 1
What should a firm's standard contract of employment require all staff to disclose?
a Any disciplinary matters with a previous employer
b Any relevant financial details
c All matters relevant to possible PI claims
d All hobbies

Question 2
In relation to client instructions, should you:
a Ask clients to put them in writing?
b Ensure that you record them in writing?
c Ensure that the client emails them to you?
d Use occasional telephone monitoring to ensure staff take instructions correctly?

Question 3
In relation to the supervision of staff, the GISC says:
a Members must adequately supervise employees during training and subsequently
b Members should provide an internal system of referral for employees so that they know to whom they can refer questions that they are unable to answer
c Supervision of employees should involve knowledge of what the employee is doing as well as quality control checks on his or her activities
d All of the above