Years of analysis of claims information and risk mitigation measures shows that firms who have successfully implemented these types of practice management measures have a much-reduced frequency of professional liability claims. The consistent application of the practices outlined below has also been shown to have a meaningfully positive impact on reducing the severity of claims or, in some cases, securing an outright dismissal of the claims against the firm.
An executed professional services agreement is essential
One of the first questions that a CNA claims analyst asks when a firm files a claim is whether there is a written professional services agreement executed by both the client and firm before the firm started working on the project. A written professional services agreement is fundamental in setting clear expectations, allocating responsibilities, and providing a framework for the timely resolution of underlying disputes.
In addition to an executed written professional services agreement, the following specific practices have been shown to have a meaningful impact on the successful resolution of claims.
Key practice management steps to take
1. Payment terms and invoicing
Clear payment terms in the written agreement, with consistent enforcement and documentation of billing and collection efforts, help prevent disputes related to payment delays or defaults. Our experience has shown that attempts by firms to collect payments on outstanding invoices often lead to counterclaims by clients, alleging negligence in the performance of professional services. Firms can avoid counterclaims by making sure that clear payment terms are in the agreement and diligently collecting payment as quickly as possible during the course of the project.
2. Interprofessional agreements and insurance certificates
Firms should have written agreements and obtain certificates of insurance (both professional liability and general liability) with all engaged professionals and contractors. This ensures coordinated responsibilities and financial protection for the firm in the event of a dispute involving services provided by the contractor’s subcontractors.
3. Pre-project planning
Engaging in a structured and documented pre-project planning process that defines project objectives, constraints, design bases, execution approaches, and monitoring procedures helps clarify expectations and reduce risks. A documented pre-project planning process is often crucial in rebutting claims of professional negligence.
4. Internal or external peer review
Conducting documented independent peer reviews of deliverables before client delivery ensures quality and alignment with professional standards, minimizing errors and client dissatisfaction. Firms that consistently take these steps are less likely to have inferior deliverables.
5. Constructability review
Collaborating with construction stakeholders early in the project to integrate construction knowledge into planning and design can reduce costs, shorten schedules, and improve site safety. Early stakeholder engagement and feedback on the design process means there are fewer surprises during the project that could lead to a claim against the design firm.
6. Submittal management
Maintaining a contemporaneous submittal log that tracks planned and actual dates for receiving and responding to submittals is a critical project management tool that helps mitigate delay claims. Our analysis of successful firms has consistently shown that managing expectations during the submittal review process decreases the chances of having a delay claim attributed to the design firm.
Firms should be aware that the Victor and CNA professional liability program encourages this set of best practices by offering a reduction of the firm’s deductible obligation by 50%, up to $25,000, for eligible firms* that show they have an executed professional services agreement and any three of the six best practices criteria above. Insureds can learn more about the risk mitigation credit (RMC) and firm eligibility.
* Eligibility to participate in the RMC is limited to firms whose annual gross billings do not exceed $25 million. In addition, certain other restrictions apply to firms with annual gross billings between $5 million and $25 million. Consult with your insurance broker or underwriter to determine if your firm qualifies for the RMC.