Any parent will tell you that you should only say something that you can follow up on. So, “Turn off that iPad or you’ll never see another screen for the rest of your life” really doesn’t work. It’s a threat, fuelled by frustration, that won’t be followed through. Parents know this and children work it out quickly too.
The same pattern sometimes appears in business. When things go wrong, frustrated parties can act irrationally and may say things that won’t necessarily be followed up on. Imagine this phone call (between ‘Firm A’ and ‘Client B’) after something on a project has gone slightly wrong:
Firm A – “yes, I agree that there seems to have been a bit of a mix up here, but give us a few hours and we’ll get it sorted for you”
Client B – “This is unacceptable, and come to think of it, the work you’ve done for us has been poor all the way through and I’m going to be making a claim for your professional negligence for my financial loss of £150,000… click… dial tone…”
It’s not difficult to imagine how common this scenario might be – we all have customers with different communication styles. In this example, Firm A recognises there may have been a misunderstanding, but feels confident knowing they can remedy any issues and fulfil their professional duties by delivering a good service to Client B. They’re also confident that Client B was just blowing off some steam as they’d been under pressure so they decide to give them a few days to cool down and then follow up. They look at their PI policy to make sure they don’t have to notify insurers and check the definition of ‘Claim’:
Claim means a written, or verbal, demand for compensation or damages due to a wrongful act.
The word ‘verbal’ is key here – Client B has made a verbal demand for compensation. So, now Firm A is in a potentially tricky situation. Under the terms of the policy, they must notify the insurers (the notification language states ‘as soon as practicable’) but they’re sure it was a heat of the moment threat that wouldn’t be followed up. Over the next couple of days, Firm A tried to get back in touch with Client B, but with no luck. Rather than run the risk of late notification (and having any potential claim declined), they decided to notify the insurer of the situation. The insurer marks up a claims file and advises Firm A to keep them informed.
A week later, having implemented the process to solve the mix-up, they finally got in touch with Client B.
Firm A – “Hi, we’ve been trying to get in touch – we fixed that issue for you so hope things have been resolved at your end?”
Client B – “Yes, thanks – that did the trick actually. Sorry about the outburst the other day, we’ve been under a lot of pressure on this job and I let my frustrations get the better of me. You’ve done a good job and we won’t actually be making a claim” …
Firm A is relieved and updates the insurer. The insurer notes the file and diaries it to close in 3 months if nothing more is heard. However, this potentially leaves a blemish on the claims record and could be something that Firm A would have to declare on future PI applications.
So, it’s worth checking what the policy states in relation to the claims definitions. One word, whilst seemingly insignificant, can make a big difference. Without it, Firm A would be safe in the knowledge that, until Client B made a written demand, they would not have to notify the insurer and it would not constitute a claim under their PI policy. They would resolve the issue in the usual way without the involvement of insurers and the potential blotting of their copybook.