In order to protect yourself, your clients and your firm against unnecessary risk, you need to limit your liability. One way to do that is to set a reasonable LIABILITY CAP for your client engagements. But getting this right is a minefield.

So to help you to navigate this minefield and overcome this problem, we have developed the Liability Caps feature for OverSuite™ subscribers.

The Problem with Liability Caps

If a liability cap is not deemed to be reasonable, it may be struck out and you could be on the hook for UNLIMITED liability, regardless of what your Professional Indemnity Insurance limit is set at.

In order for a liability cap to be deemed reasonable, it must…

  • Be drawn to the client’s attention

  • Be negotiated with the client. (Having a fixed liability cap for your firm, means it’s more likely to fail.)

  • Take into consideration the nature of the engagement with the client

  • The risk factors of that engagement

  • The client’s own specific circumstances

  • Your professional indemnity insurance limit.

How to Setup the Liability Caps Feature

Setting up the Liability Caps feature in GoProposal takes minutes:

  • Make sure you're set your Professional Indemnity Insurance Limit within the OverSuite™ Wizard

  • Under Configure > Engagement letters > Liability Caps Three Liability Caps will automatically be generated at 50%, 75% and 90% of that limit

  • Input your average monthly and one-off fees (don't worry about this being too accurate)

  • Navigate to your Engagement Letter Suite and assign an appropriate level of risk to each Scope

  • And finally, navigate to your Line Items and assign a level of risk to those too

At this point, Liability Caps are all setup and you're ready to go.

How to Use Liability Caps with your Clients

Using the Liability Caps feature is very straightforward, quick and easy.

  • As you produce a proposal, it will assign a suggested Liability Cap based on the risk factors you've added within the system

  • You're then able to discuss that with the client and agree what's appropriate

  • If you need additional guidance, then you're able to get that at the click of a button.

  • It's important to note that: If you offer a cap which is deemed by the courts to be too low as to be unreasonable, then the courts will disapply it, and you will face unlimited liability. IF YOU ARE UNCERTAIN WHICH CAP TO APPLY, OPT FOR A HIGHER CAP.

  • You're able to extend the liability cap to any named third parties who may be entitled to rely on the work that you do.

  • And finally, you need to determine whether this has been agreed with the client or not. Both options are fine, you need to state how the cap was arrived at.

  • At this point, the appropriate Limitation of Liability clauses will be added to the introduction of your engagement letter and you're done.

Further Information about Liability Caps

If you would like to learn more about Liability Caps and to better understand the thinking and reasoning that has gone into this feature, please watch the full video with our resident risk management expert.

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