Can PI insurers just “walk away” from a claim?

Posted 25th August 2023 by ctatax-admin

The story of the accountant forced to sell his practise because his PI Insurers refused to cover a claim because he lacked the requisite expertise and experience in that area has raised many questions about what professional indemnity insurance cover actually covers!

All professionals – tax advisers, accountants, lawyers conveyancers etc are required to have insurance cover against negligence at a level, and on terms, specified by their respective professional institutions.

Most people working in these firms will never have read the policy, or its exclusions, or considered the impact if, as the poor old accountant did, they work in areas that they have neither training nor day-to-day experience of to ensure but they are both competent and up to date in this area.

What must be disturbing for these professionals is that they quite often jump in “where angels fear to tread” because:

• My Client wants me to do it and;
• I’ve read HMRC’s guidance or,
• I bought a textbook on that or,
• I went on a course 6 years ago,

BUT – they actually have no real day-to-day week to week detailed experience operating in that particular area.
The PI insurers dis-claim of the claim ought to bring the minds into sharp focus for professionals when asked to do a piece of work that is not part of their mainstream business – do I/we have sufficient currency and continuity of expertise and experience to be reasonably certain that we have competence in this area?

Read: How to tell if you’ve overpaid on stamp duty

If the answer to that question is NO then they should immediately seek external expert advice to ensure that an appropriately and comprehensively insured professional is delivering the service that the client needs and not at the cost of the professionals, probably, entire business.

As far as the public is aware all accountants are the same, and tax advisers, conveyancers, solicitors etc. But this is quite naturally not the case. There are specialists and specialisms both by firms and amongst individuals and anybody seeking out special advice from a professional firm should ensure that they, at least, promote that they have expertise, if not experts in this area and that the person giving the advice is one of those experts.

Failure to make these checks may lead to the unedifying result that, in the event the advice turns out to be wrong, it is not a matter of taking a claim on the insurance but, rather, of having to sue the firm (and its individual members potentially) in order to recover their losses. This of course is an incredibly long winded and difficult process for which they will need another expert professional! (Please check he’s insured!)

Clients often try to obtain the best advice they can at the cheapest possible price and quite often they will put their existing accountant or solicitor under pressure with “well I don’t see why I need to pay for an expensive expert – you’re an accountant/adviser/lawyer/conveyancers* (delete as applicable) just like the expensive bloke down the road so you do it!

Well in the words of Red Adair famous Texas oil firefighter…

“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.