Risk, Liability & Insurance Flashcards
What is Alternative Dispute Resolution (ADR)?
The process of resolving disputes, including negligence disputes, other than by litigation.
See Appendix E.
What is Arbitration?
A private dispute resolution process.
See Appendix E.
What is Assignment?
The process whereby the benefit of all or part of a contract is transferred by one of the original parties to a ‘third party’.
If a contract is assigned by the client, the assignee is effectively treated as the member’s client. Assignment can be prevented by express words in the contract. See Appendix C.
What is a Bilateral Loan?
A simple type of commercial loan.
See Appendix C.
What is a Bracket in valuation?
The bracket of hypothetical reasonable valuations used to assess whether the valuation actually given was negligent.
See Appendix A.
What does ‘Claims Made’ mean?
The basis on which most professionals’ (and all members’) professional indemnity insurance is provided.
It means that the relevant policy for any claim is the policy in place when the claim is made (not when the work is provided to the client, or any other time). See section 6.
What is a Commercial Mortgage-Backed Security (CMBS)?
A type of finance transaction.
See Appendix C5.
What is Delict?
Used in Scots law instead of ‘tort’.
What are Desk-top Valuations?
Valuations conducted without a site visit.
What is Disclosure?
Permitting advice to be seen by or disclosed to a third party without assumption of a duty of care.
In the context of litigation, this can also refer to the parties’ obligations to preserve and provide relevant documents.
What is Duty of Care?
The duty in ‘tort’ assumed by a professional to observe the skill and care of a ‘reasonable’ professional in providing professional services.
Such a duty may in certain circumstances be assumed to a ‘third party’ as well as to the professional’s contracted client.
What is an Engagement Letter?
A letter issued by a member that records the contract with the member’s client.
It may be accompanied by terms and conditions. See section 5.
What are Expert Witnesses?
Members giving independent expert evidence to courts and tribunals.
What is Indemnity?
A contractual agreement sometimes given by a party providing professional services to ‘hold harmless’ or ‘make whole’ the client in respect of the client’s losses arising from the matter.
See paragraph 2.6.4.
What is Joint and Several Liability?
The liability partners have to claimants for claims against the partnership, co-defendants and ‘joint tortfeasors’ have to claimants.
See paragraph 6.3.
What are Joint Tortfeasors?
Parties (usually professional firms) who take on responsibilities ‘jointly and severally’ to a particular client or claimant, when they work alongside each other.
See joint and several liability and paragraph 5.3.
What is a Liability Cap?
A contractual agreement that a client can only make a claim up to the amount agreed, even if the law would otherwise award a greater sum in damages.
See section 3 and Appendices B and C.
What are Limitation Periods?
The periods specified by statute and the common law for a claimant to commence legal proceedings.
The periods vary depending on the type of claim and the type of services provided. When the period is over, the claim becomes ‘statute barred’.
What is a Limited Liability Partnership (LLP)?
A type of legal entity for carrying on business, governed in the UK by the Limited Liability Partnerships Act 2000.
Unlike a partnership, an LLP does have a legal existence as an entity separate from its partners (called ‘members’ in an LLP).
What is Mediation?
A principal form of ADR.
See Appendix E.
Who are Members in an LLP?
See Limited Liability Partnership.
Although many firms that operate as LLPs still refer to their principals as ‘partners’, the technically correct term for the principals of an LLP is ‘members’.
What is a Mezzanine Loan?
A high risk/high reward form of lending.
See Appendix C4.
What is Negligence?
Negligence is a ‘tort’. In the case of a professional, negligence is a failure to provide services with the standard of skill and care that would be expected from a reasonable body of the professional’s peers.
What is Professional Indemnity Insurance (PII)?
Insurance to cover the cost of compensating clients for loss or damage resulting from negligent services or advice provided by a business or an individual.
What is a PII Limit?
A firm’s PII limit is the maximum amount the firm’s PII insurer will pay in the event of a claim.
It is sometimes wrongly confused with a liability cap. See section 3.
What are Pre-Action Protocols?
The regime applicable to legal disputes in England and Wales whereby parties exchange correspondence and documents before commencing formal legal proceedings.
There is a specific Pre-Action Protocol applied to professional negligence claims. See Appendix C.
What is Proportionate Liability?
Liability that is limited to the damage actually caused by the particular defendant.
A ‘proportionate liability clause’ is a contractual mechanism whereby the liability of a member can be limited to the member’s proportionate liability. See section 5.3.
What is a Residential Mortgage-Backed Security (RMBS)?
A type of finance transaction.
See Appendix B.
What is Run-off Insurance?
A form of insurance that can be bought to provide cover for claims arising after a firm or individual has ceased trading.
Members have a particular need for it because a member’s PII is provided on a ‘claims made’ basis.
