Why professionals should have disciplinary cover and what’s in it for insurers?
Every professional should give consideration to ensuring that their existing cover is clear as to the availability of disciplinary costs cover.
In a climate where bringing a formal claim against a professional is costly and slow, whether or not ADR is used early, we have seen an increasing tendency by claimants, particularly in lower value cases, to seek justice before professional regulators and disciplinary bodies. In many cases, claimants appear to be attempting to obtain a favourable decision at low cost before then starting a civil claim with more confidence. In some cases, regulatory complaints may appear simply vindictive. But whatever the motivation, they generally result in huge stress and disruption for the professional involved, and disproportionately lengthy, complex and costly proceedings in which the professional will understandably need proper representation to protect their career, business and reputation. Faced with this situation, many professionals will assume that they have costs cover under their professional indemnity policy but, often, either no such cover is available or the cover is unclear and very limited in the support that insurers have agreed to offer. With this in mind, it is useful to think about why it is important for professionals to ensure they have good cover for costs in their area, and why it will often be in insurers’ interests for them to be properly represented if the worst should happen.
Until it happens, it is easy to assume that a professional disciplinary complaint might be an insignificant administrative matter to be dealt with rather like a CPD return or membership payment. Not so. The professional regulatory scene is extremely complex with different regulators adopting very different rules and procedures and, whilst some have little available to them in terms of sanction, many professional bodies have the power to impose fines, public reprimands or even to end a person’s professional career. To add to the complexity, some professions have dual regulators, both of whom will want to get involved if a complaint is made to one of them. For instance, many architects are regulated both by the RIBA, as a membership body, and by the statutory regulator, the ARB which has power to fine, as well as issuing reprimands, suspensions and striking from the register – to complicate matters further, the RIBA and ARB have different disciplinary rules and procedures. In cases where a regulator’s appraisal panel considers that a matter should be referred to a hearing, the procedure often becomes extremely formal and stressful. Inevitably, it is costly to obtain proper representation and approach the process with equality of arms where oral advocacy and cross-examination of ‘the accused’ and witnesses are a usual part of the process. Further, the law relating to disciplinary process is specialist and relatively complex, and needs to be taken into account for the professional to be properly represented and obtain the best possible outcome. So with all of these factors in mind, it should now be very easy to see why every professional should give serious consideration to ensuring that their existing cover is clear as to the availability of disciplinary costs cover, perhaps whether or not a complaint is related to a claim/circumstance, or to buying add-on cover for such costs. If the worst should happen and no adequate cover is available, the consequences could be dire.
Whilst there are a number of obvious reasons why the professional should want to have disciplinary cover, what’s in it for insurers? In many cases, of course, a complaint will be linked to a claim or circumstance which would fall to cover, and it will be in the insurers’ interests to defend the complaint as robustly as possible in order to mitigate any knock-on effects in terms of civil liability. But beyond that scenario, in a case where a complaint is not strictly covered or is not related to an insured claim, insurers should keep in mind the risks which arise where, particularly in a small professional practice, the principal and key personnel are required to focus their energies and resources on defending regulatory proceedings, often to the detriment of their ongoing business. Further, it will generally be public knowledge where a practice is the subject of disciplinary proceedings, negatively affecting its reputation, damaging its existing clients’ confidence, and often leading to real distress and serious operational risk across the practice. On the flip side, those practices which have shown the foresight to obtain regulatory cost cover, often also demonstrate sound risk management and benefit from the ongoing proactive and pre-emptive support available via a good policy.
So for brokers presenting a client’s risk on renewal, and underwriters considering an application for cover, there are a variety of reasons why practices should be encouraged to seek clear and comprehensive regulatory and disciplinary costs cover. Where such cover is in place, both insurers and insureds will derive clear benefits if the worst should happen.