COVID-19 – IMPACT ON PROFESSIONAL LIABILITY CLAIMS · 2020. 4. 15. · 04 DACBEACHCROFT COVID-19...

COVID-19 – IMPACT ON PROFESSIONAL LIABILITY CLAIMS

April 2020

01 DACBEACHCROFT COVID-19 – Impact on Professional Liability Claims - April 2020

INDEX

INTRODUCTIONWe are still in the early days of the COVID-19 induced global health and economic crisis with, by all accounts, worse still to come. However, one thing is clear, the world is changing and we will all have to adapt to that change.

It is impossible to say with any certainty what impact this will all have on claims against professionals. Whilst in many respects the claims landscape will continue as usual, where losses are suffered (and there will be many), there will almost certainly be attempts to recoup those losses from the professional advisers involved (and their insurers). On the basis that to be forewarned is forearmed, I thought it would be helpful to set out the initial thoughts of our specialist professional liability lawyers on how the COVID-19 crisis is likely to impact on claims against the relevant professions.

As you will see there are some recurrent themes: remote working, the increased use of technology and the risks associated with the redeployment of staff. Appropriate risk management may be the solution to some of these problems.

I hope that you find this review useful.

Patrick HillPartner, Head of Professional Risk

T: +44 (0) 20 7894 6930 [email protected]

ACCOUNTANTSIn a time of great uncertainty, one thing we can say is that the risks of claims and regulatory investigations will not decrease for the industry. Having said that, although there will be difficult times, we are not predicting Armageddon for the accountancy sector. In fact, there will be some areas of increased work.

We have considered the impact of COVID-19 on the three main areas of exposure that are normally of concern to insurers and then highlighted some COVID-19 specific new areas of claim.


Civil claims - expect more cases of fraud to be uncovered in these times of financial turmoil with potentially also an increased risk of perpetration of fraud.

The main generator of civil actions is fraud. For auditors, it is their failure to spot fraud, and thus stop or thwart it, which can lead to claims. Their position as corporate watchdogs (in the literal sense) and duties imposed under auditing standards make auditors an easy target. When fraud is not uncovered by auditors, these duties come under scrutiny and alleged breaches will found the legal basis of a prima facie claim. Recession, loss of revenue and financial turmoil are well known to bring ongoing frauds to light, so in the short term we can expect more claims to arise.

Will the COVID-19 epidemic make fraud more likely? Possibly. Any financial distress may encourage desperate, illegal, steps by management looking to avoid financial ruin. However, the effect may only be short term as it remains to be seen how long corporates with flawed or coronavirus damaged business models can continue trading, and thus pose a risk for their auditors.

Tax advice claims – flawed tax advice claims will continue much as usual and a renewed focus by clients on their tax positions likely in the post COVID-19 world.

We suspect that this will be an area of business as usual and predict little change in respect of claims in relation to tax advice. The ongoing problems caused by flawed tax advice linked with tax schemes (which HMRC do not like) will remain. Similarly, the risks of giving negligent advice on current tax structures and individual tax saving models will continue. If anything, with income for most declining, tax advice may take a backseat to other business imperatives in the short term. Looking forward to a post COVID-19 world, there may be an impact, with clients of tax accountants taking a fresh look at their tax positions.

Regulatory – accountants may face criticism if no qualification to accounts.

It is difficult to predict the regulatory impact as there are no metrics against which to measure the current situation. Further, legislation is being passed which changes the normal exposures to claims, for example, the wrongful trading suspension. Moreover, if there are corporate failures, they will be a heavy mix of COVID-19 driven revenue collapse and struggling business models (particularly in the retail sector).

Going concern issues are the most obviously relevant and affected of accounting measures which will be tested and scrutinised. In the current climate, auditors will almost want to default to a qualification of the accounts on this issue. If they do not put in such a qualification, and the company then fails, they might face criticism from the regulators. However, this is an obvious point and it is probably unlikely that many will make this error.

Regulatory – FRC’s attention will be diverted if expected large corporate failures arise.

If there are a number of large corporate failures, the Financial Reporting Council’s investigation teams will be kept very busy indeed. Significant defence costs bills for dealing with these investigations will be incurred. An indirect impact may be a reduction in the regulatory pressure on small accountancy firms which audit PIE’s and therefore are exposed to FRC investigations.


Coronavirus Act 2020 – HMRC powers to be extended but on a temporary basis.

Section 76 of the Coronavirus Act 2020 gives HMRC “such functions as the Treasury may direct in relation to coronavirus or coronavirus disease”. “Functions” is not defined but it is understood that the purpose here is to enable HMRC, on a temporary basis, to effectively manage the tax process during furlough, and not to extend HMRC’s powers beyond this.

COVID-19 specific claims – new areas of claim for failure to properly advise on new tax reliefs and grants with related risk of claims of failing to identify tax relief abuse.

In the short term, there are likely to be some COVID-19 specific new areas of claim. There is the potential for misuse of the Coronavirus Job Retention Scheme’s tax reliefs, grants and VAT deferrals by businesses. HMRC has said that the “Government will retain the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims.” We can expect claims to arise from the failure to identify tax relief abuse. Similarly, we can also expect to see claims for accountants’ failure to properly advise on these reliefs. The reliefs have been rushed in and HMRC’s rapidly prepared guidance may contain ambiguities or loopholes.

Practical implications – new way of working will require new strategies to cope with logistical problems such as no access to company sites.

COVID-19 is of course having an impact on the way we work. This applies equally to accountants. For example, an auditor may not be on site at a client’s premises and may therefore be unable to check matters such as stock levels against the client’s records. New ways of dealing with these types of issue will need to be found.

With so much uncertainty, accountants will look to limit their liability even more keenly where they are able to do so.

Kirsty HickPartner


Richard HighleyPartner



CONSTRUCTION PROFESSIONALS

Despite construction industry exemption from the Government lockdown, an increasing number of contractors are taking the difficult decision to stop work.

With approximately 3.3 million people employed in the UK’s construction sector, the success of the industry is clearly critical to the economy of the UK. Many have suggested this was the reason behind the decision of the UK Government to exempt construction workers from the widespread lockdown put in place on 23 March 2020 as a result of the COVID-19 pandemic. However, there are an increasing number of contractors who are taking the difficult decision to stop work on sites all around the country with the impact of those decisions being felt by the whole industry from the largest contractors through to self-employed sole traders.


The industry is experiencing real pressures to continue to deliver; cash flow issues, shortage of resource, restrictions on site and a vulnerable supply chain are putting projects (and businesses) in real jeopardy.

The most obvious and immediate consequence of the current situation will be the financial pressures placed on those businesses, with many facing immediate short-term cash flow issues. Revenue across almost all businesses in the sector has suffered a sharp decline with employees, undoubtedly, being the first casualty of those financial issues with many being furloughed or laid off altogether. Where projects do continue, they will, therefore, be under significant pressure in terms of resourcing given the much reduced workforce coupled with both sickness absence and a reduced pool of migrant workers to call upon. We are already hearing from clients that whilst sites are open, the key personnel are not necessarily on site. This is likely to have a detrimental effect on quality. Worse still, there will be a significant number of small-medium sized businesses that are simply unable to weather the financial impacts of the ongoing pandemic.

Insurers of construction professionals are likely to see a significant rise in notifications, due to quality, resource issues, delay and financial imperatives.

There is potentially a perfect storm brewing for insurers of construction professionals. For those professional businesses that are able to survive the effects of COVID-19, they are likely to face an increased number of claims as a result of professionals:

1. being unable properly to fulfil inspection duties and being held responsible for not picking up bad workmanship;

2. over-certifying the value of current works;

3. poor design or coordination of design due to shortage of professional resources; and

4. being held responsible if sites are not safe, where acting as Principal Designer under the CDM Regulations.

With projects being delayed or stopped altogether, there is likely to be a real spike in the number of circumstances being notified to Insurers even if only on a precautionary basis at this stage.


Insurers can expect to have to deal with blanket notifications, difficulties in pricing future risk and the knock-on effect the industry slow-down will have on profitability.

Whilst, at least in the short term, notifications of circumstances are unlikely to develop quickly into claims, any circumstances being notified now are likely to have a long tail making it difficult for Underwriters to assess and price future risk. Also, Insurers are already seeing blanket and vague notifications of circumstances regarding COVID-19, which present further problems for Insurers. Finally, given the number of businesses in the construction sector that will simply not survive the financial impacts of COVID-19, there is likely to be a reduced pool of clients seeking renewal terms from Insurers. In turn, this is likely to make it difficult for Insurers to generate profitable revenue from premiums given the increased level of competition between Insurers.

The future will see a significant lack of new developments and further financial pressures on the sector, but the industry will look to technology as a means of protecting itself against such events in the future.

Looking to the future, the development of any new projects must currently also be on the backburner for many. Indeed, in circumstances where architects cannot visit sites in order to develop new plans and local planning authorities are halting planning applications whilst they cannot conduct site visits, projects where construction was scheduled to start next year and beyond are also likely to be impacted. Given the precarious state of the economy, it will also be difficult for developers to secure the necessary financing for future projects. On the flip side, for those businesses that are able to weather the current pandemic, recent events could permanently change the landscape of the construction sector. New technology is likely to become more prevalent in order to better futureproof the sector to any subsequent events like this. In order to decrease the number of people required on site, contractors may move towards an increased use of robotic delivery or drones for site monitoring purposes. Whilst technology could be used to reduce overheads, such ideas would pose yet further questions for Insurers trying to accurately price future risk.

Andrew MarshPartner


Mark RoachPartner


FINANCIAL ADVISERS AND PENSION PROFESSIONALS

Investment losses will prompt critical review of financial advice leading to a flurry of misselling claims; foreseeability of losses likely to be key.

Typically when the value of investments fall rapidly and significantly as they have in response to the COVID-19 pandemic in markets around the world and across most asset classes, then individual investors suffer investment losses and this prompts them to consider critically the financial advice they have received. This has been true in previous economic crisis, most obviously the 2008/2009 financial crises and it seems likely that something similar will happen here. Just as with the 2008/2009 crisis it may well be that the foreseeability of losses of the kind that have been incurred becomes an important feature of these claims.


In time, we can expect to see a flurry of misselling claims across a range of products, from standard Stocks & Shares ISAs and bonds to more complex structures – even making that well advised DB transfer look poor. Sharp drops in the market, and hence asset and investment values, will of course also mean that losses for the usual claims are higher.

Investment funds - Higher risk, non-mainstream investments will be worst hit.

It seems likely that some investment funds will be hit worse than others and we have already seen a suspension in withdrawals from most property funds. Higher risk, non-mainstream investments tend to fare worse in situations like this than more conservative and mainstream investments and so it seems highly likely that there will again be a focus on losses incurred in those areas. The rules on advising in those areas and firms’ approaches to them have changed significantly since the 2008/9 crisis and it will be interesting to see what impact that has on claims in this area.

Pension transfers will fall under the spotlight.

Advice in relation to pension transfers from DB to DC schemes was already under close scrutiny before the current situation unfolded. It seems likely to us that, if anything, the recent market falls could sharpen the focus on this issue because the value of the new DC portfolios will have fallen significantly and the assumptions on which the recommendations to transfer were made may look much less certain.

For a while we have seen claims in relation to delays in pension transfers increasing and the administrative challenges of the social distancing measures that have been imposed for advisers and pension schemes may make problems in this area more likely.

Remote working – technological solutions will be needed to adapt to a new way of working with systems and controls reviewed to avoid data and privacy issues.

At a more general level, the financial advice sector is still one that is heavily weighted towards face to face advice. In circumstances where it is almost impossible to provide that service now, especially to older and more vulnerable clients, it is going to be interesting to see how firms adapt their business models to find technological solutions to this and how quickly they can do that. Some firms are likely to come under financial pressure quite quickly if they are unwilling to adapt and that could lead to corners being cut and ultimately, if they fail, will put a strain on the FSCS. For firms that survive, this rapid change in working practices will also put pressure on systems and controls like AML checks, record keeping and confirmation of instructions and could give rise to data and privacy issues.


Financial crime and scams already on the increase.

It has been widely reported that financial crime and scams are on the increase in the current environment and financial advisers are exposed to those risks both in terms of third parties exploiting weaknesses in their systems and controls and in terms of their own people taking advantage of the uncertainty and change to commit fraud. Remote working will increase these threats. Also, the safeguards that are relied on in the workplace, such as secure access to buildings, may not be available for those working from home leading to an increased risk of data breach.

Mortgage Intermediaries may face claims where transactions failed to complete before lockdown.

Mortgage intermediaries are likely to be under particular pressure due to the rapid slow-down in the housing market and it may well be that claims arise from delays that meant that transactions did not proceed before the government effectively hit the pause button on housing transactions.

Financial Ombudsman Service – expect short term fall in number of complaints but subsequent upturn.

From a regulatory perspective, the FOS has recently announced that its offices are now closed and this has pushed all new complaints onto its on-line platform and is restricting the availability of its telephone helplines. In the short term this is likely to result in a fall in the number of complaints although in the medium to long term we anticipate an upturn. The FOS has also said that it will take longer than usual to resolve complaints and so its current backlog is likely to increase. It also seems possible that the FOS may relax its approach to time limits on bringing claims to reflect the practical difficulties that may be arising. The Pensions Ombudsman is adopting a similar position.

Financial Conduct Authority – no slow-down in investigations and enforcement proceedings but in the longer term we can expect a review by the FCA of its priorities.

In terms of the FCA, it seems that firms involved in investigations and enforcement proceedings have not necessarily seen matters slow down or be paused as a result of the organisation’s switch to home-working. However, the FCA has decided to suspend certain planned initiatives and changes to enable it and firms to focus on the current situation. In the longer term, the fall-out from this crisis is likely to lead to the FCA revisiting its priorities and so the regulatory horizon for firms is now much more uncertain.


Pension trustees should consider taking bespoke advice on employer’s proposal to defer contributions.

In the light of the current circumstances faced by so many businesses, the Pensions Regulator issued guidance on 20 March regarding the deferment of contributions due under the schedule of contributions. The Trustees however have to consider this with great care to ensure that the employer’s proposal is appropriate. The Trustees must ensure that no payments will be made to shareholders or similar entities; that the Scheme gets a fair share of new security; that there are appropriate protections that prevent new dividends or intra-group loans; and that any immediate short term suspension is short, with proper consideration to follow shortly thereafter. Striking the right balance is going to be difficult and it is likely that Trustees will need to obtain bespoke advice on their scheme’s circumstances to try and achieve it. This is particularly so, as decisions are like to be heavily scrutinized if there are significant business failures in due course.

Pension trustees need to consider the impact of COVID-19 and the measures that the business has put in place to deal with it.

Trustees will need to be alive to other issues arising from the COVID-19 pandemic. Where businesses are changing working hours and terms, these will need to be properly understood in the context of the pension provision. There will also be a need to prioritise certain functions, by way of example, paying benefits over handling complaints and pension transfers.

Rebecca SmithPartner


Daniel PreddyPartner


INSURANCE BROKERSLack of cover will lead to scrutiny of advice given by brokers and an increase in claims.

The COVID-19 pandemic brings insurance brokers’ duties and obligations into sharp focus. Where cover for a loss is not sufficient, or excluded altogether, the advice brokers have given to their clients may come under scrutiny. There may be particular focus on advice given where terms and levels of cover have changed over recent years. However, this should be viewed in the context of the client’s risk profile at the time (and not with hindsight), as for a large majority of domestic businesses cover for pandemics would not have been considered an area of high risk.


Notifications are already on the increase particularly in respect of business interruption cover.

We are already receiving a rise in notifications. At this stage, the notifications are predominantly of circumstances and relate to policyholders not having sufficient business interruption (BI) cover for COVID-19 losses. The notifications include a change in limits for BI and/or changes in insurers’ terms not being adequately explained to policyholders.

Brokers will need to consider the practical and commercial implications of COVID-19 on their clients to avoid the risk of claims.

To protect themselves from the risk of claims, brokers need to be carefully considering the practical and commercial implications of the pandemic on their clients. Brokers may need to allow for ample time for the renewal process as it may take longer than usual for both policyholders and insurers to respond and insurers may seek addition information (such as policyholders’ business continuity plans).

Expect increased scrutiny on policyholders, tightening of wordings and reduced capacity.

Brokers are also likely to find themselves advising more clients in relation to protecting against similar events and it is crucial that brokers are able to advise on the difference in terms and cover that may be available for a particular client. They will also need to be aware that there may be increased scrutiny on policyholders from insurers and a tightening of some wordings, together with a reduced capacity in certain lines.

Sarah CrowtherPartner


Marcus CampbellPartner


SOLICITORS AND LEGAL PROFESSIONALS

It is too early to predict confidently the likely claims impact of COVID-19 on solicitors in the UK, but risk themes are already beginning to emerge.

Investment in IT that allows remote working will now pay off but adequate systems and processes must be put in place to manage risk.

The profession has until now been divided on the extent of buy-in to remote working, and the lockdown will now test firms’ abilities to manage risk competently in a different environment. Will partners and senior lawyers be consistent in their levels of supervision? Are firms set up to enable fee earners to do their jobs, and access the required documents and resources? On a basic level, what diary arrangements are in place in firms which do not have sophisticated Case Management systems to ensure that deadlines are not missed, and are there systems to ensure cases are escalated to managers in the event of IT failure, or, worse still, sickness of the fee earner? Firms who have invested insufficiently in IT and are said to still be requiring their workforce to attend the office will inevitably be at risk of sickness absences and the disruption that can cause.


Increase in missed deadlines claims in litigation expected whilst courts try to maintain business as usual.

In contentious areas of practice, there are the obvious and familiar threats of missed deadlines. The courts are showing some signs of tolerance but they are keen to see cases progressing notwithstanding the current crisis. Solicitors will still be expected to observe rules and apply for extensions rather than simply miss deadlines.

In transactional work lawyers are having to find new ways of working.

Transactional work continues and lawyers in this area have been adjusting to new ways of working. For example, real estate lawyers are collaborating to find a solution to ‘wet ink’ requirements for execution of registrable documents. In general terms, lawyers are resourceful, so the concern is not so much that they will not innovate to overcome practical problems, but how firms will respond if the crisis continues for several months. If that does happen there will be a downturn in new work, and cost-cutting and fee pressures will create new challenges for the whole profession and its insurers.

Redeployment of staff may expose insurers to the risk of claims.

Another risk to Insurers is that new economic demands will require the redeployment of solicitors. There are already noises of M&A lawyers turning to restructuring deals and insolvency departments expanding. Whilst this is important for the financial health of the firms themselves, Insurers will appreciate that this is not without risk. We have previously seen conveyancing lawyers from some of the smaller firms turning to risky fractional sales investment models and personal injury claims with disastrous consequences. The question is therefore whether firms have the experience to exploit alternative areas of demand, or whether they will “dabble”, or accept work with obvious risks which should be declined both of which will expose Insurers to the risk of claims.


SRA requires continued compliance with the rules of conduct and current investigations are to continue.

From a regulatory perspective, the SRA has already said that it requires firms to continue to comply with the rules of conduct. They have implied that they will show some forbearance in relation to existing investigations, but that is not our experience currently. The SRA is looking for new ways to progress their investigations and is unwilling to put them on hold despite the difficulties that solicitors are facing just keeping their firms running.

The ability to react, both operationally and commercially, to the COVID-19 crisis is likely to have an impact on a firm’s claims records and will be key to its continued existence.

The extent of the crisis, and firms’ ability to react, both operationally and commercially, will obviously be key to continued existence and will also potentially impact on claims records. It is too early to predict any one particular claims consequence but the themes identified above suggest it would be naïve not to expect that there will be some impact. We are recommending to firms that they focus on the key areas of deadlines and supervision in the short term.

Clare Hughes-WilliamsPartner

T: +44 (0) 1633 657685 [email protected]

Phil MurrinPartner


SURVEYORS, VALUERS AND PROPERTY PROFESSIONALS

In January, many professionals were talking up the market, buoyed by the so called Boris Bounce, and predicting something of a cross-sector surge as pent-up demand came to the fore. How swiftly things can change.


The main players in the residential sector are facing a catastrophic collapse in activity. Although technology may provide some solutions, a lack of consumer appetite is likely to remain. The silver lining is an upturn in remortgage activity.

In the residential sector, the main players on both the S&V and agency sides are bracing themselves for a catastrophic collapse in activity once transactions already in train complete. The appetite of main stream lenders has been hit and Government advice to home buyers and renters is to delay moving to a new house where possible. For some players, this could prove to be the final straw.

Valuation surveyors are used to working from home, unlike their estate agency counterparts who have been forced to join them following confirmation that they are not essential businesses and must close. Prop tech solutions, such as 360 digital camera technology supplemented by the continuing growth in on-line platforms, are being introduced in an effort to replace physical inspections and viewings. However, the big question is whether there is any consumer appetite as the lock-down measures tighten. If furloughing is not an option, redundancies and lay-offs seem inevitable and that could result in significant service delivery issues once normality returns.

On a positive note, there is the prospect of an upturn in remortgage activity as lenders look to capture business following the lowering of the Bank of England Base Rate to an all-time low. Also, with issues such as air pollution and flood risks not sitting easily with AVM technology, there will opportunities for those providing desk top / drive-by valuation products.

One word of caution, however, as most mainstream lenders pull their higher loan to value products. For those in immediate need of cash in that space there could be an opportunity for short term lenders, some of whom have already signified a willingness to accept desk top reports on property worth up to £2m. With distress risks heightened, desk top providers need to ensure that terms of engagement and limitations of liability are clearly defined.

Activity in the commercial sector will be badly hit with portfolio, statutory accounts and bank facility valuation work being the most resilient discipline. A rising demand for restructuring and investment advisory services is likely.

With UK businesses focussing on cost optimisation and maintaining service delivery, activity in the commercial agency sector will also be badly hit. Portfolio, statutory accounts and bank facility valuation work is likely to be the most resilient discipline and there is also likely to be a steadily rising demand for restructuring and investment advisory services. However, any employee-positive redeployment of resources to meet the shift in focus will require appropriate safeguards to be implemented to maintain expected service standards.

Retail, a sector already in a critical condition before recent events, seems set to stall completely and corporate landlords will no doubt be expecting a significant decline in portfolio returns in the short to medium term.


The private rental sector will face serious trouble with rental receipts disappearing while maintenance and repairing obligation remain. A poten-tial spike in claims against agents who do not take appropriate steps to protect their landlord clients and the buildings they manage is easy to envisage.

The private rented sector is also in serious trouble. After the legislative changes around taxation and prospect of far greater regulatory control, the Government’s measure to elongate the period before any eviction process can start (out to 3 months), coupled with at least one County Court deciding to adjourn all existing proceedings until June, it is fair to conclude that rental receipts are set to disappear. One tenancy deposit replacement scheme estimated that this could amount to a short term loss of £15 billion. Despite this, landlords and their agents will continue to have maintenance and repairing obligations to attend to; and the MHCLG’s further guidance on this is currently awaited. Either way, a potential spike in claims against agents who do not take appropriate steps to protect their landlord clients and the buildings they manage is easy to envisage.

New RICS guidance on continued trading during the COVID-19 crisis, with suggested wording for a “material uncertainty” clause, should be followed.

Everyone active in this sector would be well advised to embrace the very recent RICS guidance and Practice Alerts on continued trading during the COVID-19 crisis. First, all must ensure that they review and, where appropriate, revise their terms of engagement to reflect the remote service offering they are able to provide. Second, all valuation surveyors (both residential and commercial) must also give very careful thought to including reference to “material uncertainty” in all their advice – essentially a very wise qualification of any valuation based on any form of comparative analysis in light of the present uncertainties caused by the current situation. The RICS “Valuation Practice Alert – Coronavirus” has a suggested wording. Also, ensure any restrictions on information and assumptions made as a consequence of restricted access and/or valuation information are clearly stated in the report.

To date there have been no changes to the current Minimum Terms and, given the public protection ethos, change is considered unlikely.

Finally, a word on the potential for COVID-19 policy exclusions; an entirely understandable consideration given the seismic changes to service delivery that has occurred almost overnight. At the time of writing we are unaware of any changes to the current Minimum Terms and, given the public protection ethos which underpins them, would not expect that to change anytime soon.

Charlie BendingPartner


Duncan GreenwoodPartner


https://www.rics.org/uk/upholding-professional-standards/sector-standards/valuation/valuation-coronavirus/

TECHNOLOGY PROFESSIONALS

The COVID-19 pandemic has put technology firmly in the spotlight. We are likely to see an increase in claims and contractual disputes involving IT professionals.


Increased demand for home working may reveal weaknesses in IT systems leading to increase in claims.

Huge numbers of people are now working from home. There is an increased reliance by businesses on IT systems to support homeworkers. We expect that some IT systems may not be able to cope with the increased demand by users in multiple locations. Customers of IT professionals may learn that their IT systems are not as robust or capable of adaptation to this new environment as they thought. Dissatisfied customers may seek to threaten or pursue claims in negligence or breach of contract.

The sudden increase in working from home demand may also result in increased requests to managed service providers to widen remote access rights for their customers. If increased remote access is not matched with appropriate security controls, this may result in cyber-attacks or breaches. This could result in claims against MSPs for failing to provide secure systems.

Reduction in project spend may lead to contractual disputes on on-going projects.

The economic challenges arising from COVID-19 may lead companies which have already engaged IT professionals to want to reduce or delay IT project spend. This in turn may lead to an increased frequency of contractual disputes on on-going technology projects. We anticipate that parties will be looking more closely at contractual termination provisions.

Project delay may leave IT professionals exposed for failing to meet contractual deadlines.

For IT professionals, COVID-19 may lead to delays in their ability to complete on-going projects due to staff shortages and general upheaval. Contractual provisions relating to key project milestones will come into focus. IT professionals will be well advised to review their contracts on existing projects and consider provisions relating to delay and liquidated damages.

Harald LoefflerPartner


Hans AllnuttPartner


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COVID-19 – IMPACT ON PROFESSIONAL LIABILITY CLAIMS · 2020. 4. 15. · 04 DACBEACHCROFT COVID-19...

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Transcript of COVID-19 – IMPACT ON PROFESSIONAL LIABILITY CLAIMS · 2020. 4. 15. · 04 DACBEACHCROFT COVID-19...