Case studies
June 2022

Why is professional indemnity insurance important for bookkeepers?

We have approached the claims department of Kennedys, a law firm that specialises in protecting bookkeepers and other professionals against accusations of wrongdoing, and asked whether they might able to share with us some recent experience of defending bookkeepers against a claim from an unhappy client.

Cartoon of a bookkeeper's abacus, pot plant and cup of coffee.

When the table turns

A bookkeeping business was appointed to provide various HR and accountancy services by a new client. However, despite delivering the required work the client wouldn’t pay their bill. Having exhausted all their usual credit control options the bookkeeping business started proceedings against the client to pursue the bad debt.

Surprisingly in response to the bookkeeping business’s fee claim, the client turned around and made a counter-claim.

They alleged that the bookkeeping business had misadvised them on the issue of furloughing their staff. The client was suggesting that the bookkeeping business had told them to claim for the client’s employee’s wages through the Coronavirus Job Retention Scheme, when in fact the client was not eligible under the scheme.

Therefore instead of recovering the original debt the bookkeeping business was now faced with another problem, legal and financial. Luckily, thanks to having solid professional indemnity for bookkeepers in place, a quick help was at hand. The insurer immediately appointed Kennedys to represent the bookkeeping business to rebuff the client’s accusations.

Unusually the matter wasn’t settled out of court. The client persisted and the bookkeeping business ended up in court having to defend its position. With the help of Kennedys the Judge ruled in the bookkeeping business’s favour, dismissed the client’s counter claim and ordered the client to pay the outstanding invoice.

When GDPR knocks on your door

A bookkeeping business was appointed to provide payrolls services to a client. One day the client raised concerns regarding the handling of their personal data under the General Data Protection Regulations. The bookkeeping business responded to the complaint according with the their internal complaints handling process. However, the client wasn’t satisfied with the outcome and decided to make a Data Subject Access Request and refer the matter to the Information Commissioners Office (ICO). The client sent a formal Letter Before Action and ultimately issued court proceedings for alleged data breaches, acting as a litigant in person seeking various forms of redress.

In view of the nature of the issues raised and the procedural steps required in relation to the court proceedings, the insurers agreed to appoint a panel of solicitors to assist the bookkeeping with the defence. This case is ongoing and is yet reach conclusion. While at this moment in time the outcome is uncertain, it’s a huge relief for the bookkeeping business to have an expert legal team behind them.

Conclusion

Without their professional indemnity cover both bookkeeping businesses would have faced serious legal costs, the stress of having to navigate the situation themselves and possibly a reduced chance of success due to having to control the solicitor’s costs. When buying professional indemnity insurance for your bookkeeping business, be curious about the insurer behind the product and what would happen if you were to encounter a similar situation.

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