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Professional Negligence Claims Rules in Scotland and England – What’s Changed and What Does it Mean for you?

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The rules regarding time limits on making indemnity claims have recently changed in Scotland and England – with some differences in each. Howden’s Lewis McLaren takes a look the implications for both claimants and insureds.   

After a project reaches practical completion most parties involved will breathe a sigh of relief. In the following time period firms will often pursue other commercial ventures and focus on day to day matters.

However, as we commonly see in the professional indemnity world, this time period is of vital importance for bringing about claims of professional negligence. The function of limitation acts much like that of a timer, which once started and the set time has run out, you will be procedurally barred from bringing actions or proceedings in relation to claims.

The rules regarding limitation in this area have recently been amended in Scotland and as such many individuals and firms alike are not aware of the implications.

Furthermore, the limitation periods in England have also been adjusted due to the fallout of Grenfell.  This is fundamental knowledge to have if there is a contention of jurisdiction, as different limitation periods may arise which have their own functions.

In Scots law there is prescription, which legally acts differently to limitation, but for context purposes it behaves similarly.

Due to fairly recent case law[1] and newly introduced legislation[2] the initial trigger of this clock is fundamentally different to how it behaved previously in Scotland.

Before delving into the functions of the trigger, it is important to outline that the actual prescriptive period for professional negligence in Scotland is 5 years, for all types of contracts. Under the previous law, the 5 year period started to run when a claimant discovered a fact which amounted to loss or damage, even if they could not interpret it as such at the time and did not know who was to blame.

There is also a potential longstop of 20 years, which only occurs in practice where the damage caused was latent. Relating back to the introduction of new legislation, the Prescription Act 2018, which imposed that if a claim has not prescribed under the old law before 1st of June 2022 it will now only trigger the 5 year clock if a potential claimant is aware of three key facts:[3] some sort of loss has occurred, that specific loss was caused by someone’s act or omission and the identity of that person is known.

Furthermore, there are specific circumstances which relate to cladding requirements that if a building is rendered unfit for habitation then there is the possibility that the standard limitation period will be increased to 15 years, with a potential 30 year limit if the cladding was present on the building before the Act came into force.

This current state of limitation periods in Scotland now lean toward benefitting the claimant’s side, as they can potentially bring a claim long after the actual damage has occurred. Additionally, there is now the possibility that parties can extend the standard 5 year period by an extra year with use of a standstill agreement, however only after the 1st of June 2022. However, insureds should be mindful not to enter into agreement of that kind without the consent of their insurer.

In England, the function of limitation is fairly similar but with a few extra caveats.

Firstly, the limitation periods are different depending on what type of contract you enter into.

For simple contracts written underhand the limitation period is 6 years. For deeds, which require more than a straightforward signature, the period is 12 years. The triggering of limitation for professional negligence claims is related to the date that the damage is suffered by the potential claimant.

However, there are numerous exceptions to these time periods.

The most notable is to negligence claims, where there is no personal injury involved, which addresses latent damage. Simply put, if there is hidden damage, and a claim is brought then the limitation period can potentially be extended by 3 years, with a longstop of 15 years.

Furthermore, the Building Safety Act 2022 which was introduced post-Grenfell, amends the legislation relating to defective premises and can potentially extend the longstop to 30 years for work done before the 28th of June 2022. The types of claims that can arise under this new legislation are related to structural defects for pre-existing buildings.

Going forward, especially within the construction industry, never before has attention to detail mattered more in commercial engagements and more specifically how far the insurance that you hold will respond and adapt due to the newly imposed limitation periods.

In a Scottish context there could be a potential claim that comes in 20 years after work is completed on a project or up to 30 years in relation to cladding on pre-existing buildings. The same 30 year limit applies in England for similar work on pre-existing buildings; of which a claim is ongoing[4] using the new longstop. Both time periods will undoubtedly have an impact on what type of cover you hold and for how long you hold it.

This introduces a need for a higher level of diligence when signing up to projects, especially when crossing jurisdictions. In the potential event of pursuing, or defending, a claim it is now more important than ever to act promptly and with the foresight of potential claims arising many years in the future.

 

[1] David T Morrison & Co Limited v ICL Plastics Limited & Ors 2014 AND Midlothian Council v Blyth & Blyth & Ors 2019

[2] Prescription (Scotland) Act 2018

[3] Prescription (Scotland) Act 2018, s5(5)

Lewis McLaren

Lewis McLaren

Technical Executive, Financial Lines Group