As an actuary, you already know that risks translate into a lot of money, and the risk of a professional liability lawsuit is no different. That's why it's best to avoid the pitfalls that lead to such lawsuits whenever possible. Sure, you can rely on your Professional Liability Insurance if you ever do get dragged into court, but you know better than most that your policy is in place as a last resort.
Unsurprisingly, the most effective risk management strategies are often a matter of common sense. For example, you should only take cases that fall within your scope of expertise. But that's just the start. Let's review some ways to keep your actuary business out of a professional liability lawsuit.
Tip #1: Be Discerning When Accepting Clients or Cases
Risk Management Tip #1: Be Discerning When Accepting Clients or Cases
You can do a lot to manage your risks before doing any actual work. When taking on new clients or cases, consider the following questions:
- Does your firm have the staff or expertise to handle the project?
- Are the client's expectations reasonable?
- Can you meet time-sensitive deadlines in the case?
- Is the client coming from another consultant? Or have other consultants considered the case?
- How did the client choose your firm?
- Are there any red flags in the client's behavior or request?
- What does your gut instinct say?
If anything doesn't sit right with you, consider not taking the client or case. Avoiding a bad client (or one who may just be looking for a reason to sue) is worth the lost business. Alternatively, taking a request that you can't fulfill could mean trouble down the road. Use your discretion, and have a feel for what your firm can and can't handle. If you decline the client, make sure you do so in writing so you have a record on file.
Tip #2: Manage the Client and Your Relationship
Risk Management Tip #2: Manage the Client and Your Relationship
Once you decide to take a case, the next step is to make sure you and your client are on the same page. Be communicative and clear with your client about what exactly you're providing for them and how they will make payments for it. Include this in your contract, and keep them in the loop throughout the duration of the case.
Here are some things you can do to manage your relationship with clients:
- Explicitly state the scope of your services (what you will and won't do).
- Address any conflict of interest issues.
- Have a fee arrangement that outlines your retainers and terms.
- Withdraw your services if the client fails to pay.
- Update the client on any changes to your services.
- Document any client communication or emails.
- Implement a management system that allows you to document and file important decisions and handle multiple cases.
If a client fails to pay for your services, consider any alternatives before filing a lawsuit. They are likely to countersue and claim professional negligence on your part. (Related reading: "Who Can Sue Insurance Agents and Claims Adjusters for Professional Liability?")
Tip #3: Keep Your Professional Liability Coverage Active
Risk Management Tip #3: Keep Your Professional Liability Coverage Active
Professional Liability Insurance is a fundamental part of any risk management strategy for actuaries. It helps cover the cost of legal teams and judgments or settlements if you're sued over professional negligence, breaches of contract, or other alleged oversights in your work.
But every policy is different, and it's important to know exactly what your policy covers. You should be able to answer the following questions about your actuary's Professional Liability policy:
- Are you alone covered or is your whole staff?
- Are you covered if you do professional services outside of your firm?
- What period of time is covered?
- When does your policy need to be renewed?
- Are there any exclusions?
Knowing the parameters of your coverage can help ensure you don't take unnecessary risks when it comes to your work (not that you would, anyway!). And because Professional Liability is claims-made coverage, you don't want to let your policy lapse, which could leave your firm exposed if an old case comes back to haunt you.
To learn more about Professional Liability coverage, read the article, "What Does E&O Insurance Cover for Insurance Agents?"