Risk management

A quick quizYou receive a letter from a client, claiming that your firm has acted negligently and asking for damages.

Do you:(a) Telephone your insurers, notify them of a potential claim and wait for their advice?(b) Write to the client saying how sorry you are that your firm got it wrong and that your insurers will be settling the claim?(c) Send a one-line reply denying any negligence and threatening to sue the client for libel?The claim proceeds, and your insurers ask to see your file of papers.

What do you do?(a) Send the file in you know its in good order because you have strict policies about file-keeping and it has been reviewed regularly.(b) Call for the file, which you havent looked at so far, and spend several hours putting it in order before sending it.(c) Send the file in this claim is completely unfounded and you dont see why you should spend any time looking at it.Your insurers eventually inform you that they intend to settle the claim there are problems on liability, its for a small sum and it would be uneconomic to defend if proceedings were issued.

How do you respond?(a) Accept, with resignation its within your firms excess, and you would rather settle it without proceedings being issued.

Youll be examining the file to see what you can learn from this experience.(b) Agree reluctantly you dont want to have to go on thinking about this.

Anyway, the fee-earner responsible wont be getting a pay-rise this year that will cover the excess.(c) Refuse.

Youre confident that this client hasnt got the means to bring proceedings so what if you might have been at fault, you would like to call his bluff.Mostly (a): Youve got a good approach to claims, and a positive attitude.

Your firms existing risk management procedures should prevent many claims arising, but youll be sure to learn from any that you do receive.Mostly (b): Perhaps you should think about investing a little more in developing procedures and policies which would reduce the risk of claims.

It would save time in the long run.

A no blame culture, where fee-earners are not criticised for admitting to mistakes, would also benefit your firm.Mostly (c): Theres a lot you could learn about risk management but youve got to be risk aware first.

Unless you can accept that we are all capable of making mistakes, youll be unlikely to recognise the areas where risk can arise.The moral: if you receive a claim, dont panic contact your insurers, who will be able to advise you.

An objective view can only help.

Your insurers will have experience of dealing with claims and will discuss liability, causation and quantum.

And of course, you should ask your insurers to advise you on effective approaches to risk management.l This column was prepared by the St.

Paul risk management team