A letter of demand should be treated as a potential Professional Indemnity claim and dealt with promptly.
An engineer should generally:
- preserve the letter and all related correspondence
- note any response deadline
- avoid admitting liability
- avoid agreeing to pay or rectify the alleged loss without insurer guidance
- gather the relevant contract, scope, drawings, calculations and project records
- contact the broker promptly so the matter can be notified to the insurer in accordance with the policy
Do not ignore a response deadline while waiting for the insurer. The broker, insurer or appointed legal adviser should guide how the demand is acknowledged and answered.
If urgent action is needed to protect safety or prevent further damage, that action should not be delayed. Keep clear records of what was done and why.
The engineer should avoid debating the merits of the allegation with the claimant before the insurer has had an opportunity to review the matter.
For broader Professional Indemnity guidance for engineering practices, see Engineers Australia’s Professional Indemnity Insurance guidance.
