Construction Industry Claims: Letter Writing Hints and Tips

Man writing on notepad with phone in hand.

An integral role in dealing with claims against your firm is responding to correspondence that you have received.

Whilst Insurers are there to assist and guide you, under the terms of your policy you are required to provide full co-operation and assistance with the investigation, defence, settlement, or mitigation of any actual or potential claim. Insurers will therefore often request that letters are drafted by you. Whilst this can be time consuming, it helps you to retain control over correspondence and the relationship with your client as sometimes Insurers’ drafting may not be the most appropriate as you know the situation best.

To assist you in getting this right first time, we have pulled together some hints, tips and advice based on our experience of reviewing and discussing draft responses with Insurers to try and hit the nail on the head with the first draft.

Hints & tips

DO
  • Give yourself enough time to draft a suitable response and also try to allow time for Insurers to consider this.
  • As far as possible, respond in a timely fashion to avoid the matter escalating and the possibility of criticism. 
  • Stick to the facts as much as possible. It is best to avoid using emotive language and try to refrain from sending overly detailed responses unless it is essential, as this can encourage unnecessarily lengthy correspondence that goes beyond the issue in hand.
  • When acknowledging the complaint, set out the timescales contained within your complaints procedure. This will save you being chased by your client and helps manage their expectations. If it becomes clear you cannot make the indicated timeframes, inform the client accordingly.
DON'T
  • Make admissions or inferences of acceptance of liability unless previously discussed with your Insurers. 
  • Make any offers to settle or indemnify any losses within your letter unless this has been discussed and approved by Insurers.
  • Send any correspondence without reference to your Insurers. This can open a door for Insurers to take issue with this and in serious cases, reserve their rights under the policy. If you have a tight time frame, please give us a call or mark your email as urgent and we will do all we can to respond quickly and obtain urgent instructions where required. 
  • Over complicate matters. As above, stick to the facts to avoid a client’s ability to draw inferences from comments or omissions that were not necessarily required in the response.
  • Try and rectify the mistake or make offers to do so without the prior consent of your Insurers. It will not always be appropriate.
  • Advise the client that your insurers are involved – this can encourage the claimant to progress a claim they may otherwise not pursue.
     

Adjudication

  • It is imperative that you advise your insurers immediately of any intention by another party to refer a dispute to adjudication. Most policies will contain strict guidelines for notification to insurers, often requiring notification to be made within 2 working days.
  • In order to best prepare for an adjudication, it will require an intensive period of information gathering so it is important to give your insurers as much time as possible to investigate.
     

Pre-Action Protocols

  • Please bear in mind that you may receive correspondence from the claimant, or their legal representative, suggesting the matter is handled under the Pre-Action Protocols.   There is a formalised legal process, designed to reduce costs and certain obligations ensue.
  • There is more than one format of Pre-Action Protocols and we have seen many instances where the claimant has referred to the incorrect one. However, whichever protocol applies, you should act swiftly as (per the Pre-Action Protocols for Construction and Engineering Disputes) you may only have as little as 14 days from the date you receive a Letter of Claim to acknowledge receipt and 28 days in total to provide a formal Letter of Response.
  • It is particularly important to ensure these timescales are met as, otherwise, the claimant has the option of proceeding straight to a formal court process, with the court having the power to order payment of some or all of the claimant’s costs of the proceedings due to any perceived failure on your part to comply with the Pre-Action Protocols. 
     

Importance of obtaining advice from insurers


You will of course be aware that there are certain obligations under your Professional Indemnity policy to keep Insurers in the loop and not to undertake any steps which may prejudice Insurers’ position. It is therefore important to ensure that Insurers are taken along for the ride and ‘buy in’ to any strategy that you wish to adopt. Remember, Insurers don’t like surprises!

The risks of not obtaining prior authority from Insurers can be serious. Insurers can reserve their rights under the policy if they would not have agreed to a particular course of action that has been undertaken without their consent. For example, if a letter has already been sent admitting liability but Insurers think the claim could have been defended, they may feel as though their position has been prejudiced. Similarly, Insurers will not be happy if an offer has been made above the policy excess without their consent as they may be committed to settling the claim and paying out before they have had a chance to comment.

What this reservation of rights means for you is that Insurers could seek a reimbursement from you to the extent they feel they have been prejudiced. It is therefore imperative that draft letters are sent to Insurers for their prior approval. Most importantly, it protects your position as Insurers are precluded from later saying that they would have dealt with matters differently, particularly if the position deteriorates.

Now that we have set out some hints and tips and explained the importance of drafting letters, below we have included some practical examples of phrasing things in an Insurer friendly way.

Conclusion


Always remember that Howden and Insurers are there to assist you in reaching the best possible outcome of any claim/potential claim notified under the policy. Both we and Insurers see these claims on a daily basis so our knowledge and advice is always available - make sure you benefit from this knowledge. It may be, for example, that we/Insurers have successfully defended a similar matter in the past and have a number of helpful arguments that can be suggested to you to incorporate into your draft letter. Or perhaps you know what you want to say but are struggling to particularise this in a letter. It is always helpful to have another pair of eyes to provide extra guidance.
 

As we have touched on above, if timing is an issue, please let us know. It can be easy to be put off running a draft letter past Insurers if there is an urgency to respond. However, for the reasons mentioned in this article, we would caution against this. Instead, flag the urgency with us and we can expedite the matter with Insurers. 

Ultimately, please remember that we are all on the same side so there is no downside in seeking guidance from us and/or Insurers. We would encourage you to make the most out of your policy and both we and Insurers fully appreciate that you may not be used to dealing with contentious matters on a regular basis, if at all.

Our specialist construction claims team at Howden are always happy to discuss matters with you and offer guidance in relation to draft letters or notifications generally. Please do not hesitate to contact your designated claims specialist. 


Adapted from a previous article written by Nicola Vince, Howden UK and Chloe Bingham, Kennedys

Nicola Vince, Howden UK
Senior Claims Executive, Professional Indemnity
T: 
+44 (0) 020 7133 1217
E: [email protected]

Chloe Bingham, Kennedys
Associate
+44 (0) 20 7667 9679
E: [email protected]