The court found:
• the relationship between the parties was "sufficiently proximate" as to create a duty of care. It was reasonable for them to have known that the information they had given would likely have been relied upon for entering into a contract of some sort. That would give rise, the court said, to a "special relationship", in which the defendant would have to take sufficient care in giving advice to avoid negligence liability. The relationship was that the plaintiff trusted the defendant with the information and therefore the defendant ought to have been honest.
• however, on the facts, the disclaimer was sufficient to discharge any duty created by Heller's actions. Therefore, there was no order for damages.
This case led the way on the development of Professional Indemnity insurance; in the USA it is more commonly known as Errors and Omissions (E&O) insurance. Insurance was a much needed solution to what had become a growing problem.
The insurance was developed to provide cover for insureds’ losses arising from their oral or written negligent misstatement. However, as time has gone by
the cover provided under these policies has expanded with changes in liability of firms and individuals to include covers such as:
• Libel and slander • Cyber liability • Data protection • Unintentional breaches of copyright
• Loss of documents or data
A common mistake is passing on confidential client data by accidentally copying the wrong person into an email! Or perhaps a one-off comment about a third party at a function that affects their income!
Please bear in mind that Professional Indemnity insurance does not cover you for your losses arising from your loss of reputation because of your negligent misstatement; your financial loss could be greater than that of your clients!
The Professional Indemnity insurance market in the UK has changed dramatically especially over the last ten years. We initially saw significant rate-cutting and an oversaturated market by insurers, but the last few years have witnessed a mass exit of insurers from the underwriting of professional indemnity risks. Consequently, combined with the insurance market losses, the cost of insurance is rising significantly and insurers are no longer as flexible, or willing to underwrite certain risks as they used to be.
So insurers that have remained in the Professional Indemnity insurance market have taken measures to limit their exposures and reduce the risks of paying out costly claim settlements. These measures include:
• Requesting additional information before renewal terms are provided, particularly information regarding business operations, supply chains and how insureds manage risk.
• Charging increased premiums: Insurers lost a lot of their profits from claims arising from recent tragedies, disasters and other professional negligence exposures. Because of this, they have had to increase the premium rates to ensure that adequate cover can be provided.
• Applying cover restrictions: Insurers are imposing more restrictions on policies such as limiting cover to a single aggregate amount, imposing a higher excess, excluding consequential or economic losses and removing some extensions, such as cyber cover.
Even though these are challenging times for those that need Professional Indemnity insurance there is always a glimmer of hope as insurance premiums and restrictions on covers have always shown to be cyclic.
Matrix Insurance Services Ltd - Provider of professional indemnity scheme for IIMS members
Karen Brain
Matrix Insurance Services Ltd. and the author of this article do not accept any liability for any errors or omissions in this article. The information contained in this article is for general use only and is not intended to constitute legal or insurance advice and should not be treated as a substitute for such advice.
Managing Director – solicitor non-practising
Tel: 01892 724060
enquiries@matrix-ins.co.uk
128 | The Report • June 2021 • Issue 96
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