Tips for Managing Professional Liability Risk
|Malpractice claims are more common than ever… and affect more types of businesses than you might imagine. Here are some tips for minimizing your risks in this area.
|Stay within your realm of expertise.
One of the best ways to limit your professional liability risk is to limit your services to those for which you are exceptionally well qualified. Don’t be tempted to take on assignments or projects that are “out of your league” even as a favor to a friend or to satisfy a client for whom you provide other services.
|Action Step: List the types of services you feel are your specialty. Make sure your staff is clear about what’s acceptable “business” for your business. And make sure those are the only services that are outlined in any promotional material about your company.
|Clearly outline expectations before work begins.
Consider giving your clients with a written “letter of engagement” or other formal means of outlining what services you will, and won’t, be providing. Review and sign this document with your client to ensure that you share the same understanding of the work to be performed.
|Action Step: Consider what form of “expectations management” document is appropriate for your industry. Involve an attorney who is familiar with and experienced in handling legal work in your industry, and consider whether any disclaimers, limitations of damages, and other terms are appropriate. Integrate this documentation step into your work process.
|Keep detailed project and client files.
Make sure everyone on your staff documents every step in the process for any particular service or project. Encourage everyone who is involved to review documentation on any previous actions, before they initiate any new ones.
|Action Step: Review your documentation procedures. See if there are any holes in your process, and take steps to address them. Research whether any state or federal laws require that documents for your type of business be kept for a specific period of time.
|Review how to report a claim…before you need to.
Before you ever need to know, you’ll want to know how to handle a professional liability insurance claim. For example, you should know whether your insurance policy requires you to use a certain attorney or whether you’re free to choose your own.
|Action Step: Review, with your agent, the procedures for filing a professional liability claim. You’ll also want to know when your policy requires you to report a claim or circumstances that could lead to a claim. Document these procedures and file them where you can find them easily.
|If you are ever sued, contact your attorney and tell him or her everything.
The more you tell your attorney, the more prepared he or she will be to defend you in a professional liability case. Remember, any communication between you and your attorney is “privileged,” meaning he or she is legally required to keep your confidences. So don’t hold back any details, even if you think they may be unimportant, embarrassing, or incriminating.
|Don’t share your story with everyone.
While communication with your attorney is protected, your associates can be subpoenaed to testify in a trial.
|Action Step: Don’t put your associates in an awkward position or harm your own defense. Be discrete about discussing your situation.
|Prove your innocence when possible; reduce your responsibility when necessary.
Of course, if you’re liable for the claim, you’ll want to do all you can to prove your innocence. But keep in mind that how much you may have to pay in damages is often related to how responsible a judge or jury finds you. And a judgment against you may be more harmful to your business reputation than a settlement.
|Action Step: In many cases involving disputes between parties, the defendant faces some possibility, but not a certainty, of legal culpability. Consider with counsel and your insurance company the pros and cons of any settlement opportunities.
|Don’t skimp on your insurance coverage.
This is one area where you definitely don’t want to be caught short. Even a single lawsuit alleging professional misconduct can not only drain your assets, it could destroy your business. So make sure you have enough coverage from a reputable carrier.
|Action Step: Consult a professional agent to determine how much professional liability insurance is appropriate for your industry and your particular situation. And make sure you purchase this coverage from a highly rated insurer that will be there if and when you need assistance.