In today’s fast moving business world, professionals such as consultants, accountants, lawyers, and engineers play a fundamental role in ensuring smooth operations. However, when these professionals fail to meet the expected standards of care, businesses can suffer huge reputational and financial damage.

Understanding professional negligence is crucial for businesses to mitigate risks, protect their interests, and take appropriate action when things go wrong.

What is Professional Negligence?

Professional negligence happens when a professional fails to perform their duties to a satisfactory standard, leading to financial loss or harm to their client. This failure can originate from errors in judgment, poor advice, or a breach of duty.

Three key elements must be established to advance a claim for professional negligence:

1. Duty of Care – The professional must have had a duty of care toward the business.
2. Breach of Duty – The professional must have failed to meet the expected standard of care.
3. Resulting Loss/Causation – The business must have suffered financial or reputational loss due to the breach, which is not too remote.

The initial limitation period for bringing such claims is six years from the negligent act or omission. If such negligence is discovered outside of this period, the limitation becomes three years from when the negligence was discovered.

There is a final limit which prevents a claim being brought after 15 years from the date of negligence occurring.

The Impact of Professional Negligence on Businesses

Professional negligence can have severe consequences for businesses, including:

Financial Loss: Incorrect advice or errors can lead to significant financial damage.
Reputational Harm: A business’s credibility may suffer if professional negligence affects customers or stakeholders.
Operational Disruptions: Delays, regulatory penalties, or legal issues can hamper business continuity.

Examples of Professional Negligence

Professional negligence can arise in various industries. Some common situations include:

Legal Professionals: A lawyer missing a crucial deadline, leading to a case being struck out.
Accountants: Erroneous tax advice resulting in penalties for a business.
Consultants: Providing incorrect strategic advice that leads to financial loss.
Architects and Engineers: Poor design work causing construction delays or safety risks.

How to Prevent Professional Negligence

While businesses cannot eliminate all risks, practical steps can minimise the likelihood of professional negligence affecting them:

1. Due Diligence Before Hiring Professionals

Before engaging professionals, businesses should check credentials, experience, and client reviews to ensure reliability.

2. Clear Contracts and Expectations
   Clearly outline the scope of work, responsibilities, and expected standards in legally binding agreements to avoid misunderstandings.
3. Performance Reviews
   Assess the work of hired professionals periodically to identify potential issues early.
4. Professional Indemnity Insurance
   Ensure that professionals have adequate professional indemnity insurance to cover potential claims in case of negligence.
5. Seek a Second Opinion
   For major business decisions, a second opinion can reduce the risk of relying on poor advice.

What to Do If Your Business Suffers from Professional Negligence

If your business has been impacted by professional negligence, consider the following:

1. Gather Evidence: Document all interactions, agreements, and any losses suffered carefully.
2. Communicate with the Professional: Attempt to resolve the issue directly with the professional or their firm, where possible.
3. Seek Legal Advice: Consult a solicitor specialising in professional negligence claims.
4. Consider Litigation or Alternative Dispute Resolution: Depending on the severity, legal action may be necessary to recover damages.

Conclusion

Professional negligence poses a significant risk to businesses, potentially impacting their finances, reputation and client trust. Understanding what constitutes professional negligence and implementing proactive risk management can help mitigate such risks faced by businesses.

Taking appropriate steps will help ensure long-term success and resilience in an increasingly complex business landscape.

How can we help:

We are committed to safeguarding the best interests of London businesses. Our experienced Dispute Resolution team provides expert guidance and representation to help you navigate the complexities of litigation with confidence. Call 020 3440 8000 or email: disputeresolution@tvedwards.com

This article was first published in London Business Matters in March 2025.

Disclaimer: The information on the TV Edwards website is for general information only and reflects the position at the date of publication.