January 16, 2017

US - Speed Trap: The risks of changing expectations in professional services

We live in an age where people are connected worldwide as never before and have come to expect results quickly, yet in certain circumstances a fast response is less important than a correct one. The rendering of professional services is an area in which quality - not speed - should be the primary consideration. Errors and omissions are more likely to occur during rushed efforts, which in turn can increase the risk of liability.

In the 21st Century, our consumer culture is increasingly connected and impatient. Whether it's the self-checkout lane at the supermarket, a phone app that lets us order takeout lunch to avoid a line, or one-click alternative payment systems such as PayPal, many of today's innovations are developed with speed in mind. In representing companies that insure professionals across a variety of disciplines, at firms both large and small, one of the predominant themes we see is that professionals often increase their risk of liability by acting in undue haste.

This phenomenon is part of a broader cultural transformation in which consumers’ expectations of service are increasing, especially around the speed of response. These changing expectations may be creating a greater risk of E&O liability for professional service providers. Heightened expectations for responsiveness increase the pressures on professionals who are eager to please their clients. In that sense, there appears to be more opportunity for professional negligence, as professionals may, consciously or not, prioritize speed over thoughtfulness and accuracy. Mistakes occur more easily when one is trying to perform under time constraints. With business being transacted in multiple time zones across the globe, professionals increasingly are providing clients with advice outside of normal business hours, further contributing to a heightened sense of urgency.

There are other important reasons to avoid acting in haste. In many industries, notably in law, construction and financial services, a professional duty of care exists. The burden on E&O plaintiffs, therefore, is to prove that the defendants failed to meet the duty of care applicable in their jurisdiction. The California Supreme Court noted that "the services of experts are sought because of their special skill. They have a duty to exercise the ordinary skill and competence of members of their profession, and a failure to discharge that duty will subject them to liability for negligence. Those who hire such persons are not justified in expecting infallibility, but can expect only reasonable care and competence." (Gagne v. Bertran, 275 P. 2d 15 - Calif. Supreme Court 1954)

One corollary of the increased need for speed is that professionals increasingly find themselves working while on the move. With more work taking place outside of the traditional office environment, E&O liability risk can increase, for example, if professionals fail to follow proper procedures for documenting their clients’ instructions. This is an obvious risk for transactions that involve near-term financial gain or loss, such as real estate, insurance and financial services. When a missed deadline causes a client to lose the opportunity to sell a property, for example, the inevitable result is an unhappy client. Forgetting to follow through on filing a lawsuit or binding insurance coverage may trigger more than words of complaint. Even when the professional service delivered is advice that may have a longer-term financial outcome, there is E&O risk. The desire to respond quickly, especially out of eagerness to service a large account, needs to be balanced with the professional’s duty of care.

Most attorneys have experience with clients who seemingly expect a response immediately after hitting "send" on their email. While some clients may indeed have unrealistic expectations, the need for speed may more often be perceived than real, and most law firm clients in fact would prefer to have an attorney take his or her time and provide thoughtful advice. Regardless, whether motivated by a desire to impress a client or to mark tasks off their to-do list, some lawyers are responding more quickly to client questions than they should be. Lawyers must be conscious of the increased potential for errors and omissions that can result from providing split-second legal advice from their phone while out to dinner or at their child's Saturday morning soccer game. In most instances, the lawyer would be better served to respond by acknowledging the client's inquiry and committing to provide a substantive response within a set time frame, once the lawyer has had an opportunity to research and reflect upon the issue.

Timing can be similarly critical in the world of design professionals, where architects and engineers face professional liability based upon delays in the construction projects in which they are involved. When a construction crew is mobilized and on site, or a project's grand opening is fast approaching, the pressure to deliver design drawings quickly can be immense. The financial losses that occur from design professionals’ errors and omissions frequently take the form of design defects that delay construction, adding time and expense to a given project. Occasionally, mistakes in design result in catastrophic failure.

To reduce the risk of liability, professionals must remain aware of business practices and habits that can cause errors and/or omissions. Adherence to established risk-mitigation procedures and periodic training for new associates of professional-service firms are important ways to protect against E&O liability. Responsiveness is a virtue in all business, but speed should never be a substitute for quality and accuracy.

Eric Moon is a partner in the San Francisco office of Clyde & Co, focusing on professional liability and insurance law.