Professional indemnity claims: small error, big problem

category Claims

To School of Risk home

On the Road Again kla4067

Paid in full

The unwitting star of our fourth real-life claim story is a chap called Malcolm. At least that’s what we’ll call him.

He owns and runs a successful payroll company, built from scratch and growing well.

As we’ll see, he was the victim of a problem rearing its ugly head just when it was least expected.


Best laid plans

When Malcolm and his wife planned their summer holiday, standing by the side of a French motorway trying to get through to Malcolm’s business insurance broker wasn’t exactly high on the ‘to-do’ list.

But that’s how it began. He’d had a call from his number two back in the office that morning advising him that, somehow, their biggest client’s payroll had been overpaid. In fact, it had been triplicated and their client was some £80,000 lighter.

They were asking for Malcom’s business to pay it back immediately, with their costs added on too. An outlay of this size, in one go, would have a significant impact on Malcolm’s cash flow and his own payroll was just round the corner …

He was on his way back to Calais to catch an emergency ferry home when he remembered he’d bought some professional indemnity insurance a couple of years ago. He had a vague recollection that it covered mistakes – and this was certainly one of those. It had to be worth giving his broker (us) a try.

It was. Over the roar of the traffic, we managed to get the basic details and a idea of what the situation called for. We let him go and got on the phone to one of his insurer’s solicitors.

They advised that the situation wasn’t quite as dire as Malcolm had feared and it represented more of a problem to be worked through rather than the start of a desperate legal battle.

In less than an hour, they’d put together an email for Malcolm to send to his client. It was important to take control of the situation early to stop things escalating. The email acknowledged the error and set out how the repayments would be made.

We called Malcolm back (he’d made it to a service station, road safety fans), reassured him that it wasn’t a complete disaster and explained the next moves. The relief in his voice was palpable. He approved the email and we went from there.

The road less travelled

Over the next few days, we liaised with his UK office to gather the information and correspondence his insurer needed to build their case. They soon confirmed cover and we worked on a proposal for Malcolm to put to his client.

He gave the plans the thumbs up and continued with his holiday, safe in the knowledge that he’d still have a business when he returned.

In the end, most of the overpayments were recovered with his insurer picking up the tab for the shortfall. The loss amounted to just a few thousand pounds – far better than the tens of thousands initially mentioned.

And most importantly for Malcolm, he got to keep his biggest client. In fact, in conversation with us at his policy renewal, he’d remarked that, if anything, their relationship was stronger. They’d been impressed with the professional manner with which the problem had been sorted and had more faith in him and his business as a result.


Image / photographer: On the Road Again kla4067 |

More from this category

How does an insurance broker help with claims?
Claims-in-a-cartoon #2: the five-grand typo
Claims-in-a-cartoon #1: free advice costs thousands
Buy online in minutes. Less admin, more business!
yay banner image