IT'S A FACT OF WORKING LIFE that sometimes things simply go ‘pearshaped', so it makes good business sense to have Professional Indemnity insurance. But taking out cover is just the first step; if you need to make a claim you'll need to have hard evidence to support your case, as Sharon FoxSlater of EBM's RentCover explains.
No matter how diligent an agent you are, sometimes issues arise and you can find a tenant or landlord accusing you of failing in your duties. This is where Professional Indemnity (PI) insurance is a safety net, protecting you from financial loss following a claim of negligence against you by covering your legal defence costs and damages payable.
PI cover is a necessary and smart move, but it doesn’t replace the need for you to meet your obligations or provide proof of what you purport to have said or done, in the event that you need to make a claim.
If you are being sued for negligence or breach of duties under contract, the tenant or landlord will need to demonstrate that you owed them a duty of care; that you did something or failed to do something that a reasonable person in the same circumstances would have or not have done, and that they suffered some harm or loss because of what you did or didn't do.
On your side, your PI insurer will ask you to provide evidence that you took appropriate actions to fulfil your obligations under contract, and took responsible and reasonable care to avoid loss or injury to another.
Records documenting contact with landlords and tenants can be useful if you need to make a PI claim and defend the action against you.
However, a problem can arise if you are not able to provide the required documentation to prove that you fulfilled your obligations.
AGENT LEARNS A COSTLY LESSON
Issue A tenant was injured when they fell through rotten steps at a property. The tenant had advised the agent of their concerns about the deteriorating steps on several occasions and eventually had notices issued for the problem to be remedied.
Agent's response The agent notified the landlord by recording the state of the stairs in their regular written reports. However, when writing about the issue, the agent failed to say what exactly needed to be done and how soon the landlord was expected to fix the problem; in other words, they didn’t ask for instructions from the landlord or advise that the repairs were extremely urgent, or provide a timeframe in which the landlord needed to respond. The agent simply awaited a response from the landlord. In essence, by failing to seek instructions in an appropriate and very specific manner, the agent’s routine report to the landlord amounted to ‘no action’.
The problem was compounded by the fact that the landlord didn’t have email, so the agent was posting the inspection reports and breach notices, and there was no cover letter drawing attention to the pressing issue with the steps.
Fallout When the tenant was injured, the landlord denied being aware of the problem – and the agent was not able to prove that they had notified the landlord. The landlord said that none of the letters and notices posted were received, and as the correspondence was sent via regular mail the agent could not prove that the letters had been sent or delivered. Cost The agent was held liable for the tenant’s injury and will have to pay the cost of the claim, which is in excess of $200,000.
Lesson The agent did most things correctly – inspections, writing letters, notifying the landlord of the tenant’s complaints, calling the landlord – but without the documentation to back it up, they were exposed.
The best way to protect yourself and ensure that you will be able to produce the evidence if necessary is to Act and Document.
Immediately notify the landlord – in writing and by calling – of tenant complaints, especially ones that relate to safety
Set a timeframe for immediate action. If nothing happens, advise your client in no uncertain terms that due to their lack of response and instructions, you no longer hold yourself responsible for any consequences that may stem from their inactivity
Do whatever you can in the circumstances to mitigate losses – cordon off the dangerous area, approve urgent works within your authority, and so on Take photos
Never rely on giving or receiving verbal advice or instructions – use email or registered mail to confirm conversations, verbal agreements, proof of delivering copies of letters or notices, and so on
Notify your PI insurer. It is a requirement under cover that you inform your insurer ASAP after you first become aware of a situation which could potentially result in a claim being made – in other words, as soon as you are advised that a tenant or a third party sustained an injury, even if the landlord or tenant hasn’t made a formal complaint or engaged a lawyer.
Log everything – complaints from tenants received, calls made, including time of call and what was discussed, emails, landlord requests and responses, and so on – in your CRM and client files. Record your notes, conversations, emails, correspondence, milestones and, if red flags are raised, record the facts and events
Put the notices or inspection reports in a letter on your company letterhead
Include a cover letter carefully detailing what the issue is
Seek instructions from the landlord. Give the landlord a timeframe – maybe 24 hours or less if urgent – in which to reply and instruct. Advise the consequences of failing to do so (such as costs incurred, will be in breach of tenancy agreement and legislation, and so on). Do whatever you can to mitigate the existing situation until such time as you receive appropriate instructions to act
Emphasise that now the landlord has been notified and instructions sought, responsibility for any subsequent issue that may eventuate will rest with the landlord. Let the landlord know you’ve met your obligations and it is up to them to provide instructions to act
Email the letter or notices and also send a copy by registered mail.
THE BOTTOM LINE
In the eyes of the law, unless you can prove it – it didn’t happen. So make sure you ’re covered by collecting all the evidence you need to back up your case. Remember: complete paperwork and documentation is the key to a successful defence. Your PI insurer will thank you and you’ll be relieved that you have succeeded in proving your case.
RECORDS DOCUMENTING CONTACT WITH LANDLORDS AND TENANTS CAN BE USEFUL IF YOU NEED TO MAKE A PI CLAIM AND DEFEND THE ACTION AGAINST YOU.