Contributed Article

If in doubt, shout! How to deal with potential claims

26 May 2015

By Renee Anestis

If a private investigator walked through your agency door and started asking questions about a property under your management, what would you do? Would you answer their questions? Or would you stop and take the time to think through the potential implications of providing facts and information that might eventually impact a professional indemnity insurance claim?

“Agents need to understand that any information they provide in such circumstances could potentially be used against them in later proceedings if a claim is made,” explained Nancy Rainbird, Claims & Compliance Manager at Realcover. “That’s why it is so important to notify your insurer as early as possible if you think there is any possibility of a claim being made.

“I always say, ‘if in doubt, shout!’ Your insurer is there to help. Things can easily go wrong if you don’t seek the right advice early on.”

When it comes to professional indemnity insurance, there are two ways to deal with a potential claim: the wrong way and the right way.

What can go wrong?

“A few years ago there was a case where the simple act of agreeing to be interviewed by an investigator ended up placing the property manager centre stage in a legal drama,” Ms Rainbird recalled.

In the case in question, a fire had broken out in a rental property, causing significant damage. Unfortunately, the property manager agreed to be interviewed by a private investigator representing the owner’s insurance company. Based on information given in the interview, the insurance company declined to pay a claim for damages caused by the fire. Instead, the property owner was armed with enough information to start proceedings against the agency for breach of professional duty.

“Because the property manager made a number of damaging admissions to the investigator, the agency’s insurer was left in a much more difficult position when defending the claim,” Ms Rainbird said.

“From an insurance point of view, the property manager had no obligation to give the statement to the investigator and the agency ultimately faced a damages claim of more than $300,000.

“The lesson here? Don’t give a statement when you are under no obligation to do so!”

The right way to handle a claim

In contrast, Ms Rainbird points to a case where the property manager responded in a different way after a flight of stairs collapsed in a rental property. The property manager made sure that the tenants were safe, offered to call the SES to help a person who was trapped upstairs and immediately organised emergency accommodation. The following morning, the property manager photographed the damage, advised the property owner to speak to their insurance company, and organised for a builder to check the condition of the staircase while arranging a quote to be made for any repairs. Furthermore, at a subsequent meeting with the tenants, the property manager noticed that one of them was limping and quickly arranged for her to see a doctor. 

“This is a great example of doing things the right way,” Ms Rainbird said. “The property manager made detailed notes, attended the property to take photos and contacted the owner when an issue became apparent.”

How did the property manager know to do all of these things? “They notified their professional indemnity insurer immediately, so they were assisted and given the right advice early on,” Ms Rainbird said.

Contacting your insurer

“Contacting your insurer and seeking accurate advice as early as possible is the best way to manage a potential claim,” Ms Rainbird said.

“It’s all too easy to regard criticism of your services or the threat of a claim as being unjustified and without merit. But this does not remove the agent’s obligation to notify their insurer. The fact that an agent is aware at all may trigger the notification provisions of their professional indemnity insurance policy.

“It’s never too early to pick up the phone and talk to your insurer. You just never know how much one phone call could save you – in angst and dollars!”

While care has been taken preparing this article, and the information contained in it has been obtained from sources that Realcover believe to be reliable, Realcover does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose that the article may be used. Realcover accepts no liability for any loss or damage (whether caused by negligence or not resulting from the use of this article).