... and how smart professionals defeat professional negligence actions
This is an area which has seen a rising number of cases in recent years. The terminology “professional negligence” is almost a contradiction in terms.
Actions of this sort should denote a failure to adhere to the relevant standards of professionalism; it is also a sub-set of actions where plaintiffs, sometimes impecunious, look for someone to blame – professionals are seen as having deep pockets, they tend to have both assets and insurance.
We have successfully brought a number of the former and successfully defended a number of the latter type of claims.
Professional negligence, put simply, is a breach of duty by a professional to his/her/its client(s). There are normally four elements: (1) a duty; (2) a breach of that duty; (3) causation, i.e. did the negligence cause loss and damage; and (4) damages flowing from the breach of duty.
So far so good but what happens in practice? There have been a number of esoteric advances relative to the scope of the duty owed by a professional and there have been a number of cases going both ways relative to the width/scope of that duty and the number of persons to whom it is owed.
In most cases things have clearly gone very wrong and the lay client knows that matters are not right and this may all but be admitted. There are, however, a number of cases where the lines are blurred at least to start with.
What initial steps should be taken? As a starting point, Sinels 101s are as much in point as ever. This involves collating all of the relevant evidence, documentation, witness testimony and related at an early stage, as well as keeping an eye on the relevant prescriptive period which in Jersey is three years but in most countries is five or six years. There are some exceptions relative to prescription and it can be extended in some circumstances but these are rare and difficult exceptions.
The other point that often arises in professional negligence type cases is that whilst the professional could have done things better or differently or has made a mistake, that is not the cause of loss. Loss was, for example, caused by market forces, insolvency of the counterparty and/or by error of the plaintiff. Complex causation equations in relation to cases of this nature can lead to lengthy and increasingly uneconomic litigation. Exacerbating factors on both sides can be either a wholly unrealistic damages claims or an idiotically parsimonious attitude by the paying party.
Sometimes the lay client simply knows that the outcome is wrong and it then takes some analysis to work out why it went wrong and who, if anyone, is culpable. At that stage relevant professionals in the same field as the potential defendant can add enormous value at an early stage.
Where these types of actions differ is that at the crux of a professional negligence claim is an evaluation of competency by reference to the norms of the relevant trade or profession. Crunching that equation as soon as possible saves time, money and angst later on. The legal team need to understand the mechanics of the trade or profession and how that area of expertise worked in practice and what relevant guidelines may be in force. This avoids the blind leading the blind and enables a more realistic opinion on merits to be formed.
Pragmatic case management often mandates taking on an advisor from the relevant field almost from the off, that person is often not the same as an expert witness who is independent from the litigation team. So often this action has either saved thousands later on by informing actions and investigations from the off and/or given the team a very good idea on the merits at the outset.
The other thing that plaintiff’s teams should be examining early on is the record of the defendant in its area. Has he/she/it been sued before in similar circumstances? Institutions sometimes have systemic faults in their operating systems. Class actions mean splitting the costs; fellow travellers means cross-fertilisation of information, ideas and resources.
Conversely, defendants sometimes know that that plaintiff or his lawyers have tried it on before. Similar fact evidence can be both admissible and compelling.
I referred earlier to insurers. Professional persons and institutions ordinarily carry professional negligence insurance which covers most claims. A lot of professions do not enable practitioners to practice unless they have a certain minimum amount of insurance. Some professionals carry huge excesses, i.e. a layer of claim which they will cover without recourse to their insurers. In a big partnership it could be over £1m, in other cases some firms are big enough to self-reinsure and establish a captive insurance company.
The first thing to ascertain when suing a professional person is whether they are good for the money, some simply are not and in that case the existence or otherwise of insurance is a big factor. There is no point in running long and difficult litigation if there is no recovery at the end of it.
To give a practical example, Sinels dealt with the defendant who had, by law, to be insured but his practice was shambolic and asset searches came back indicating little if anything of worth. We were much heartened after the service of proceedings when we started receiving letters from one of our larger and infinitely more expensive competitors which indicated to us that there must be insurance in place. However, what I had suspected for some time was that upon receipt of the claim or the intimation of claim the insured had buried his head in the sand and not told his insurers, in cases like that insurers do not pay the insured.
We wrote pointedly and asked whether or not the defendant was insured. Our competitors refused to be drawn and eight weeks later they announced that they were no longer acting, the defendant had vitiated his insurance.
In the case of professionals with big excesses they will be a large institution and good for the money but the problem at that level is that it can come with internal politics which can be very difficult to deal with by either the plaintiff or the defendant. The point in relation to this excess is that this money is going to come out of the partners drawings and partners tend to have views on which partner ought to be absorbing the loss so raising the money if you are the defendant, even on a small claim, can be fraught with administrative and other difficulties from the plaintiff’s point of view life becomes very difficult because although you can see that the defendant’s lawyers have advised that payment ought to be made, the goalposts keep moving because of the internal politics.
We once went to a mediation where we were suing a large law firm, there were fourteen people on the other side of the table, the excess and two different layers of cover all wanted to be at the table. It all came out in the wash as they took a pragmatic view but it could have ended very differently.
Insurers/underwriters in themselves can be good, bad and indifferent. In conjunction with a senior member of the English Bar who also sat as a Judge, I once gave a lecture entitled ‘Making the Buggers Pay’, i.e. how to extract monies from difficult insurers when you are the insured. This is not always easy.
If you are the insured, get your underwriters on board. They may have their own advisors but explain what the matter is all about and make sure that they understand what the claim is and what its strengths and weaknesses are and get yourself a line of communication with them that works. Hopefully they will have good quality advisors as things go horribly wrong behind the scenes. Over the years I have seen good, bad and indifferent at that level but if you are the insured make sure that the insurers are in lock step with you and they understand where you are coming from.
Conversely if you are the plaintiff it is important to remember that insurers deal with money not feelings. Sometimes it is best to talk to the insurers’ lawyers direct because they can be very pragmatic. They are not a pushover but they will pay based on their perception of the strength of the claim and the complete costs of going to trial.