What is Professional Negligence?

As a professional service provider, clients rely on your knowledge and experience. Whether you’re providing them with advice, diagnosing a problem or designing a custom solution, you could be in hot water if things go wrong.

Let’s take a closer look at these types of claims, including a professional negligence definition, how to avoid a negligence lawsuit, businesses and professions that may be affected, and the role of Professional Indemnity insurance in protecting your small business.

Professional negligence defined

Negligence claims made against sole traders and businesses come in two forms: ordinary negligence and professional negligence. Either can be devastating for a small business, but businesses that offer services or expertise generally face greater negligence risks.

What is ordinary negligence?

Ordinary negligence occurs when your carelessness causes physical or financial harm to someone else. Any small business can be accused of ordinary negligence if they ignore their “duty of care” to customers, clients, or members of the public.

A common example of ordinary negligence is a slip-and-fall accident:

Water spills in your retail shop, and you fail to post ‘wet floor’ signs around the area or mop it up in a timely manner. A customer slips in the water and injures themselves. You could face a negligence lawsuit because you didn’t take reasonable care to prevent harm to others.

Ordinary negligence claims are typically covered by a business’ Public Liability insurance.

What is Professional negligence?

Professional negligence (also referred to as malpractice) occurs when you do not take the same amount of care that others with your specialised training or expertise would. Because your customers or clients rely on your expert knowledge, you must meet a higher standard of care.

Medical malpractice lawsuits are a well-known type of professional negligence. For example, a patient alleges that a medical professional did not provide appropriate treatment, which resulted in further injury.

Professional Indemnity insurance covers professional negligence lawsuits and claims.

How to avoid a negligence lawsuit

In a perfect world, your clients would always be happy with the services you provide and would never have cause to question your work. Unfortunately, reality is often quite different.

As a professional service provider, special care should be taken to ensure you do right by each client. You may take steps to help avoid negligence lawsuits, such as:

• Only offering advice that you are qualified to give
• Ensuring client contracts clearly spell out your responsibilities, deliverables and deadlines
• Giving clients updates during projects and alerting them to potential issues
• Documenting all client communication, such as sending a follow-up email summarising a phone conversation
• Knowing your state or territory’s duty of care laws
• Staying current with best practices in your industry

What if you’re sued for professional negligence?

While following steps like those discussed above can help you avoid lawsuits, one may still come your way.

Professional negligence lawsuits can be devastating for small businesses. You could be liable for your client’s financial losses that you caused, which might become very expensive. Beyond the financial costs, a professional negligence lawsuit could also damage your reputation.

Even if you’re not at fault, defending yourself against a professional negligence claim can be expensive, quickly draining your bank accounts and taking time away from running your business.

That’s why many service-based businesses have Professional Indemnity insurance. These policies are designed to cover the costs of professional negligence claims and lawsuits, including your defence costs. They help professionals shield their small business and personal finances so they can keep their business running smoothly.

Can your business be accused of professional negligence?

Any business that provides a service could be accused of professional negligence. If your business provides expert advice, represents clients on their behalf, or designs custom solutions, you could be sued.

Many types of businesses are potentially at risk of a professional negligence claim, such as:

• Accountants and Bookkeepers
• Architects and Engineers
• Consultants
• Disability Workers
• Hair and Beauty Services
• IT Professionals
• Migration Agents
• Nurses
• Personal Trainers
• Real Estate Agents
• Tax Agents
• Yoga Instructors

Taking steps to avoid a lawsuit and getting Professional Indemnity insurance could help protect your small business. BizCover can even help you get instant cover so you can serve your clients with greater peace of mind.

In as little as 10 minutes, you can compare cover and buy a Professional Indemnity policy that fits your unique needs. You can even sort other types of insurance—like Public Liability and Cyber Liability—at the same time, saving you time and money.

Compare policies today and save with BizCover today!