Member Article

Loss of documents and insurance cover

With Watson Burton LLP Law Firm

In the event that documents for which a business is responsible are lost, damaged, or destroyed, then that business may be liable to its clients for the cost of their restoration or replacement.

Professional Indemnity Insurance policies often provide cover against loss of documents, and will typically indemnify an Insured against claims arising in connection with its business in respect of legal liability incurred due to loss of documents, and costs and expenses incurred in replacing or restoring the documents.

Policies may cover loss of client documents which have been entrusted to the Insured by its clients. For example, firms of solicitors often hold important legal documents on behalf of their clients, such as title deeds, and insurance should be sought to cover the possibility of such documents being lost, damaged or destroyed.

Importantly, policies may also cover loss of the Insured’s professional documents, which may for example include client files and important correspondence.

The policy should only indemnify an Insured against loss of documents where the Insured is liable to its client for their safekeeping. A duty of care may be created in writing through a contract, by written or verbal correspondence confirming acceptance of instructions, or by the Insured’s conduct in accepting receipt of the documents from its client after being instructed to hold them on their account.

The policy should clearly define the types of loss which are to be covered. The idea of “loss” is not limited to the misplacement of documents, and a typical policy should indemnify against losses resulting from documents being damaged, destroyed, mislaid, distorted or erased. This would cover eventualities such as damage caused by fire or water, as well as the mislaying of documents, and may also cover irregularities with computer hard-drives or disks whereby documents are corrupted or distorted.

Insurance covering loss of documents is becoming increasingly common in professional indemnity policies, and should be considered by businesses which hold client documents for safekeeping as part of their everyday work. Insured parties should ensure that the limit of indemnity provided for under the policy is sufficient to meet the cost of replacing or restoring all documents which have been entrusted to them, which may represent a substantial sum.

If you have any questions in relation to this article please contact Stephen McLellan at Watson Burton LLP at stephen.mclellan@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .