Industry
Part of Getting professional liability right the first time
Professional liability checklist for the engagement file
Professional liability checklist for the engagement file: policy items to record before the work, during it, when a client complains, plus the records to keep.
Complaints about professional work are rarely about a dramatic blunder. They are usually about a gap between what the client thought they were buying and what you thought you were selling, discovered months later when something did not work out.
That is good news, because the gap is manageable. Almost everything on this professional liability checklist is done before anyone is unhappy, costs nothing, and is the material your defense would be built from.
What to take away
- Scope written down at the start is worth more than any endorsement you can buy.
- Record the assumptions and the client information your work relied on, inside the deliverable itself.
- The moment a client complains, stop and read your policy's notification wording before you offer anything.
- Keep the engagement file for as long as a claim about that work could still arrive, which is longer than your accounting retention.
Policy checks a project-file audit cannot catch
A routine internal project-file audit — the review a firm runs over scope notes, approvals, and deliverable versions before a job is closed out — can confirm that the documentation exists. It cannot establish whether the policy responds to a claim. A quality or peer review asks a different question again, usually whether the work met the standard of care, not what your declarations say. Read the declarations, the form, and every endorsement for these items:
- Coverage trigger:Is the policy claims-made, claims-made-and-reported, or occurrence-based? For claims-made coverage, confirm how the policy defines when a claim is made and reported.
- Retroactive or prior-acts date:Check the date shown in the policy and confirm that renewing or changing coverage will not leave earlier work without the intended protection.
- Extended reporting period (tail):Find out whether the policy offers an extended reporting period after coverage ends, what acts it applies to, and what the policy requires to activate it. A tail generally concerns reporting claims for earlier work; it does not extend coverage to new work.
- Consent to settle and hammer clause:Check whether the insurer's consent is required before settlement and whether refusing a recommended settlement can limit the insurer's payment under the policy wording.
- Defense costs:Confirm whether defense costs reduce the limits available to pay a claim or are paid outside those limits.
- Limits, retention, deductible, and premium:Write down the per-claim and aggregate limits, the retention or deductible, and the premium shown on your declarations page or renewal quote, one line for each policy year. Keeping those figures with the file is what lets you compare a renewal quote against what the expiring policy actually carried.
- Exact policy form:Record the form number and edition shown in your policy documents, along with any endorsements. Professional liability does not have one universal form, so the wording that applies is the wording issued for your coverage.
Before the work starts
- Put the scope in writing, including what is excluded.The excluded half is the part that gets argued about. Name the things a reasonable client might assume are included and are not.
- State what the deliverable is and what it is not.A model is not a guarantee, an estimate is not a fixed price, a review is not an audit. Say so where the client will read it.
- Record the information you were given and are relying on.If the client supplied data, drawings, or instructions, list them and say the work assumes they are accurate.
- Set out the assumptions.Anything that would change the answer if it turned out to be wrong belongs in a list at the front of the document.
- Agree who decides.Name who on the client side can approve, instruct changes, and sign off.
- Read your own limitation of liability clause.It is one of the few protections that costs nothing, and it is given away in template contracts every week.
- Say what standard you are working to.This cover is generally built around a standard of care rather than a guaranteed result, so a document promising an outcome has moved the exposure outside what the policy contemplates.
- Check the client's insurance clause against what you hold.Whether a policy actually delivers what a contract demands is an endorsement by endorsement question, worked through in the guide to contract insurance requirements.
- Confirm the work is inside your policy's definition of professional services.A new kind of engagement is exactly when that definition stops matching.
While the work is running
- Confirm instructions in writing.A short email after a phone call, summarizing what was decided, is the cheapest evidence there is.
- Version the deliverables.Know which document the client actually used and when it was issued.
- Flag scope creep when it happens.Extra work absorbed quietly becomes extra liability accepted quietly.
- Escalate a slipping timeline early.Late delivery is a common route into a dispute even when the work itself was sound.
- Keep advice in channels you can retrieve.Guidance given in a messaging app that nobody archives is guidance you cannot later prove or disprove.
- Handle client material with care.Where you hold personal or sensitive information, the obligations run alongside the insurance question rather than instead of it. The standard expected of a business is set out in the FTC's Protecting Personal Information: A Guide for Business, and the coverage side is in the publication's cyber insurance guide.
- Watch subcontracted work.Whether your policy reaches work performed by someone else, and whether they carry their own cover, is a question to settle before the work, not after.
The moment a client is unhappy
This is where good businesses damage their own position, usually by being decent about it. Work through this order.
When a client is unhappy
- Read the policy notification provision
- Notify early; it is not an admission
- No free rework, refund, or credit yet
- Do not apologize in terms accepting fault
- Freeze the file, no tidying or deleting
- Write your own note of events
- Route contact through one person
- Stop and read the notification provision in your policy.Find out what triggers your duty to notify and how it must be done.
- Notify.Early notice is normally in your interest, and the policy generally requires it. Reporting a circumstance is not an admission that you did anything wrong.
- Do not offer free rework, a refund, or a credit yet.Policies commonly contain a provision about voluntary payments and assumed obligations, and a well-meant gesture made without the insurer's knowledge can prejudice the claim you are trying to protect.
- Do not apologize in terms that accept fault.You can be human and responsive without conceding responsibility. Acknowledging that someone is unhappy is not the same as agreeing you caused it.
- Freeze the file.No tidying, no back-dating, no deleting drafts. Preserve it as it stands, including the messy parts.
- Write your own note of events while you remember them,and keep it separate from the client correspondence.
- Route further contact through one person.Multiple people answering the same complaint produces inconsistent accounts.
The file you keep afterwards
Records retention on this line is not driven by your accountant but by how long a claim about that work could still arrive, which depends on your state's law and your policy's terms. Two rules usually set the outer edge: the statute of limitations for professional claims and, for work on buildings and sites, the statute of repose. Ask your broker about the policy terms — the requirements guide covers what a client contract can demand of your cover — and a lawyer in your state about those rules. For insurance questions, the regulator to look up is the department of insurance for the state whose law governs your policy; those departments, which coordinate through the National Association of Insurance Commissioners, do not set your firm's professional-record retention period.
What to keep per engagement
- Signed contract and variations
- Scope, assumptions, exclusions as issued
- Client-supplied material as received
- Every dated version of the deliverable
- Sign-off and who gave it
- Correspondence including informal channels
- Subcontractor evidence of cover
- Expired policy documents
Storage should survive a laptop failure, a departing employee, and a change of software. If you cannot produce the file for a job you finished three years ago, that is the thing to fix first.
The exposure itself, and why judgment rather than accident is what triggers it, is set out in the overview of this cover. Which lines respond to which kind of loss in your sector is in the insurance by industry guide, and the mechanics of reading what you were sold are in the guide to reading a renewal quote.
Common questions
A client asked for a discount rather than making a complaint. Does that count?
It might. Commercial pressure often arrives dressed as a negotiation. Ask your broker how your policy defines a circumstance, and err toward telling them.
Can I fix the problem myself and avoid the whole thing?
Sometimes remedial work is the right commercial answer, and sometimes it is exactly what the insurer would want. The point is to find out which before you commit, because doing it first and asking later can cost you the claim.
Should the limitation of liability match my policy?
That is a conversation for a lawyer who can see the contract and the wording together. What you should not do is sign an unlimited obligation on the assumption that insurance stands behind it.
How long is long enough to keep files?
Long enough to cover the whole period in which a claim about that work could still be filed under your state's statute of limitations or statute of repose. That is longer than feels reasonable, but storage is cheap, and the file is the only version of events that is not somebody's memory.
