Case study: professional indemnity covers critical legal defence
Published 15 July 2021
A professional error of a few degrees in a large construction project resulted in a substantial damages case, with media coverage compounding the pain for the surveyor involved. When his ability to choose his own legal defence under his insurance policy came into question we were able to back him up to achieve a resolution.
Our client was a surveyor engaged by a builder to carry out the set-out of a seven storey residential apartment building. Due to an error in data import, the set-out was incorrect by approximately 700mm and the building was partially constructed in the wrong position.
Knowing the seriousness of the issue even prior to any formal claim being made, the Gallagher claims advocate immediately notified the client’s insurer and advocated for the appointment of experienced professional indemnity solicitors to help protect our client’s interests. There was significant push-back from the insurer who preferred to conduct the defence in-house.
A formal claim for rectification costs was brought by the builder and appeared to be significantly inflated, being in the region of $1.5m. The claim included extensive costs involved in continuing to build in the wrong position and losses said to have resulted from the encroachment of the building onto a neighbouring property.
At the same time, the plaintiff’s solicitors alerted local media to the issue and the subsequent newspaper article caused some distress to our client, along with the potential for reputational damage. It was clear that the claim needed to be settled quickly before it attracted any further media attention.
The Gallagher claims advocate raised numerous issues with the in-house defence proposal and escalated these to the insurer’s head of claims. Eventually the insurer appointed the lawyers we recommended, albeit on a limited basis. When proceedings were formally initiated, the insurer then upgraded to the engagement of our chosen lawyers to fully conduct the defence.
The claim was eventually settled with some very skilful legal negotiation on the part of defence counsel in the amount of $825,000 plus costs.
The Gallagher difference
Due to the Gallagher claims advocate’s knowledge of the policy and its provisions for the defence we were able to persuade the insurer that early external legal involvement was necessary. Our extensive network of solicitors enabled us to identify who would be best placed to handle a defence case of this nature, and because of our involvement the client had the best defence available to them and the claim was settled swiftly without serious damage to their reputation.
We pride ourselves on our claims service
Part of our commitment to building business confidence is fighting for what’s right, and supporting clients through claims is one of our key pillars of business practice.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.