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8 Ways to Reduce Your Professional Liability Exposure

Feb 25, 2022 · 5 minutes to read

Professional liability lawsuits can be expensive. Even a small claim could cost thousands of dollars in legal fees, lost productivity, and compensation to your client. It’s better to avoid professional liability claims and lawsuits, if possible, but how?

Minimizing potential professional liability risks may help prevent many worst-case scenarios. The time you put into identifying and minimizing these risks will likely far outweigh the cost of a lawsuit or customer claim.

Here are 8 ways to reduce the professional liability exposures in your business:

1. Identify risks to your business

To reduce your professional liability risks, you need to first know what they are. Consider how you currently do business: Are there processes in place to catch mistakes and errors in your work? How do you manage tight deadlines or interruptions to your services? How are client complaints handled? What are the risks that others in your industry are talking about?Asking these and other similar questions can help you identify areas in your business that may need to be addressed.

2. Create risk management processes

Once you’ve identified the professional liability exposures in your business, you can begin to address them. For example, you might create a review process to help catch mistakes in your work before it is sent to the client. Or you might create a contract template that clearly explains your rates and expected project timelines to your clients.A professional liability risk management plan can help you manage common industry risks and those that are unique to your small business.

3. Prioritize staff training

Risk management processes only work if everyone knows about them and uses them every time. Before implementing a new procedure, all relevant staff should be trained in the changes. Training should be given to new staff members as part of their onboarding, and everyone should be given regular refresher courses to make sure they’re still following the correct processes.Ongoing staff training also signals to your employees that the professional liability risk management plan should be respected and used every time.

4. Clearly define the scope of your work

Clients hire you to do work that they do not have the expertise or skills to do themselves. They may not even fully understand what’s possible, especially if you are working in complex areas, like the law or IT. This is where you need to be as transparent as possible, clearly explaining what services you can and cannot provide to them.Setting realistic expectations about the work you are doing for each client could help prevent claims of negligence or undelivered services.

5. Communicate with clients

Leaving clients in the dark, even when their project is on track, probably isn’t a good idea. Regular updates when you hit important milestones will likely be appreciated and help them remain confident in your ability to get the job done. You should also update clients when things aren’t going to plan. Letting them know about issues (such as missed deadlines or delays) as soon as possible can help them adjust their expectations or plans.Clear, regular communication with your clients could help stop setbacks from becoming a professional liability lawsuit.

6. Put things in writing

Projects often don’t go exactly the plan, and you may need to make changes as things progress. Even if you get a verbal OK from your client, it’s still wise to also have them sign off in writing, so you both have a record to refer to. You may also consider sending clients notes of any meetings or calls during a project.Putting things in writing provides a record of your interaction with a client that you can both review if there is ever a dispute or something that needs clarification.

7. Have a response plan

What if you’ve been following your professional liability risk management procedures, but a mistake is still made? How you respond could minimize the risk of your client making a claim or lawsuit. Make “worst-case scenario” plans that cover who should reach out to the client, and how you will protect your employees, business assets, and professional reputation.Prepare a response plan for if something goes wrong, so you’re not left scrambling in an emergency.

8. Consider Professional Liability insurance

Despite your best efforts, you may still face a professional liability claim or lawsuit from an unhappy client. Professional Liability insurance helps minimize the impact these can have on your business. A policy would cover your legal expenses relating to the claim, including settlements or judgements you’re ordered to pay to the client.Insurance for professional liability and a risk management plan can work hand-in-hand to help protect your small business.

Professional liability risk management is essential to professional service providers. As a business owner, you want to protect your livelihood in every way possible. Identifying and taking steps to avoid unnecessary claims and lawsuits could help you weather many of the ups and downs of owning your own business.

Looking for Professional Liability insurance? BizInsure is here to help—learn more and compare quotes instantly today.

*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.

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