Professional Negligence Claims in UK

UK courts have increasingly been finding that professional negligence claims will become time-barred 6 years after the date of advice, regardless of whether the claim is made in contract or tort.

The Court of Appeal has now confirmed this trend and has expressly recognized that the limitation periods in tort and contract ought broadly to be the same where a claim is essentially contractual in nature.

A professional's relationship with his or her client is usually contractual in nature.  However, professional negligence claims tend to be made both in contract and in tort.  Often this is done because the limitation period allowed for claims in negligence is perceived to be more generous than for those in contract.

For claims in contract, limitation will run from the date the contract is breached by the provision of negligent advice.  However, limitation for claims in tort will not begin to run until the claimant first suffers damage as a consequence of the negligent advice.  Claimants often use this to their advantage by asserting that they did not suffer damage until long after they received negligent advice, effectively allowing them more time to bring a claim.

Yet the clear weight of case law, to which the Court of Appeal's recent decision can now be added, shows that claimants very rarely succeed with this argument.

Indeed, the Court of Appeal emphasized that in cases of negligent advice the person relying on the advice will usually have entered into a transaction of some kind which has turned out to be flawed in some way.  The fact that the flawed transaction has been entered into will usually be damage from the claimant's point of view, meaning that the limitation period in tort begins to run at that point not at some later date when a more tangible loss manifests itself.

Of course, a remaining potential advantage of negligence claims in tort is that the claimant can benefit from an alternative 3-year limitation period running from the date they first acquired knowledge of their potential claim.  However, the case law on this issue is also relatively strict on claimants and only allows them 3 years to investigate whether they might have a claim against a professional rather than allowing them 3 years to issue a claim once they have confirmed the existence of such a claim. 

Accordingly, professionals and their insurers can increasingly expect to avoid claims for advice given more than 6 years ago and claimants who delay in issuing their claims run a real risk of being time-barred.

Guest Post: European D&O Market Primed for Robust Growth

New laws put corporate directors at risk, sparking demand for protection.

Directors of European companies are more likely than ever to be sued by disgruntled shareholders, according to a new report from Advisen Ltd. As a result, directors and officers liability (D&O) insurance is one of the fastest growing insurance products in Europe, and sales will continue to increase at a brisk pace in the coming years.

Accounting scandals and corporate governance shortfalls have led to new laws across Europe requiring greater transparency and heightened shareholder protections. Additionally, legal systems have been reformed to give shareholders unprecedented access to the courts. These governance and legal reforms expose directors to greater liability, and lawsuits naming companies and their directors have increased throughout Europe. Some recent suits have settled for hundreds of millions of Euros.

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Securities regulators across Europe have stepped up enforcement activities in recent years, further exposing corporate directors to liability. Regulators across the globe are sharing information and coordinating investigations, putting additional pressure on multinational corporations. Investigations and other enforcement activities not only are costly for companies, they also can spark shareholder suits.

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Advisen's 20-page report, European D&O Insurance Market to Benefit from Governance and Legal Reforms, tracks the latest developments in legislation, regulation and litigation reform across Europe, and shows how the rapidly shifting management liability landscape is transforming the D&O market. It offers management liability brokers and underwriters a unique pan-European perspective on the D&O market, while presenting actionable information on a country-by-country basis for marketing, sales, product development and strategic planning purposes. The report is essential reading for risk managers of any company with European operations to understand the emerging liability picture and how the rapidly escalating risks faced by their firms' directors and officers vary by country.

European D&O Insurance Market to Benefit from Governance and Legal Reforms can be purchased for $499 at The Advisen Corner, http://corner.advisen.com/reports_topical_european_do.html.