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Always check the fine print of your professional insurance policy


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A large European Company placed a substantial order with our member amounting to many thousands of Euros. The deal included an understanding that 50% would be paid on completion of the work and the remainder 30 days after invoice. The job was for a translation into English from German. The project was problematical from the start due mainly to the difficult timescales and the numerous changes continually made to the original text. None-theless the job was completed on time and returned. No immediate payment was forthcoming.

The client some ten days later sent an e.mail complaining about the formatting and some small mistakes. In order to expedite payment (this happened just before Christmas 2003) a small discount was offered in respect of the 50% completion invoice which the client accepted and payment was shortly made. The client was grateful and appeared to be happy.

Our member started chasing the remainder of the invoice some 30 days afterwards which resulted, four to five weeks later, in an entirely different complaint coming from the client. He now complained that due to the original problems, financial losses as a result of the late printing of the documentation had occurred which also included additional publishing charges' (sic). He went on to say that his costs which he thought were substantial could be settled by a unilateral deduction of the entire balance of all the money outstanding in respect of the unpaid invoice. This he would accept as full and final compensation. Consequently, the client claimed the entire balance as compensation (by dint of not paying his bill). This was hotly and lengthily disputed by our member but to no avail. Certainly there was never any agreement nor any kind of acquiescence to this arrangement.

Since our member had had an official communication from his client explaining his rationale for the "compensation" which he clearly wasn't going to retract it was decided that an approach would be made to the Insurance Company providing professional indemnity cover. Irrespective of the manner in which it was "paid" the money claimed and taken was, for all intents and purposes, compensation.

Their criteria for the claim against the insurance company rested on following premises:

  • That if the client had paid our member (which in fact he should have done, the bill was very overdue) any subsequent demand for compensation would have provoked in any case a direct recourse to the Insurance company.
  • That at no time did the member admit, accept or agree to such compensation. However the Insurance Company have resisted the claim since they state that:
  • By giving our approval to the initial complaint and offering a discount we have acquiesced to this claim. They see no difference between the two situations
  • That this in fact a bad debt. Despite much correspondence on the part of our member the Insurance Company will not change their stance and have now issued our member with the threat of a withdrawal of cover if they continued to plead their case!

Our member wishes to stress the following. The fundamental point which needs to be addressed here is simply this. One naturally supposes that the purpose of indemnity insurance is to cover the insured against any compensation claims for alleged financial loss or damage incurred by our clients. It must be immaterial to the case whether the compensation was taken out of money owed or paid later as a result of an actual claim. What is important is to establish whether a claim actually exists and this is the job of the Indemnity Insurers. For an insurance company to say that we acquiesced under these circumstances and therefore broke the agreement is, in our view, entirely specious.

The ATC member has sought legal advice both from their own advisors and the Association’s legal support line. It has yet to be resolved, but when it is Communicate will report the outcome. There will be many translation companies anxiously looking through the details of their professional indemnity cover to see whether they could find themselves in the same situation.

 

If you have been worried by any aspect of this cautionary tale, consult the ATC’s own professional indemnity insurers, McParland Finn 00 + 44 (0) 236 2532. The ATC contact is Jon Leese.

 

This article was originally published in Communicate - the Association of Translation Companies' newsletter - www.atc.org.uk









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