The purpose of damages in professional negligence is to put the claimant in the position they would have been in but for the negligence — no better and no worse. This is the indemnity principle, and it means the claimant cannot recover the same loss twice. Where a claimant has already been compensated for a loss from another source, the damages against the negligent professional are reduced to avoid double recovery.
Common sources of offsetting recovery include payments from other defendants in multi-party proceedings; amounts recovered under the claimant's own insurance; payments received from statutory compensation schemes; and amounts recovered through the sale or realisation of assets acquired as a result of the negligent advice or service. The principle applies regardless of the order in which the recoveries are made — a claimant who recovers in full from one defendant cannot then recover the same sum from a second.
The Civil Liability (Contribution) Act 1978 allows a defendant who has paid more than their just share of a common liability to claim contribution from any other person liable for the same damage. This is significant in multi-party professional negligence claims where several professionals — say, a solicitor, a surveyor and an accountant — each contributed to the same loss. The claimant recovers 100% of the loss from any one of them, and the paying defendant then seeks contribution from the others. The court apportions liability as it considers just and equitable under section 2 of the 1978 Act.
The claimant must give credit for any benefits received as a result of the negligence that they would not otherwise have received. If a negligent valuation caused the claimant to buy a property at an inflated price, but the claimant has since occupied the property and benefited from rental savings, those savings may reduce the loss. Similarly, if a negligent solicitor caused the client to enter a disadvantageous contract but the client derived some benefit from performing that contract, credit must be given.
Where a PI insurer pays a claim on behalf of the insured professional, the insurer acquires subrogated rights to pursue or be joined to the claimant's claim. Insurance brokers should ensure that clients understand the subrogation dynamic: if the insured professional is found jointly liable with another party, the insurer who has paid the claim will pursue contribution from that other party under the 1978 Act. This can complicate ongoing commercial relationships, and early notification to the broker and insurer allows these dynamics to be managed before positions harden.
The indemnity principle also constrains the insured professional's recovery from others. A professional who settles a claim for more than the loss actually suffered — perhaps to preserve a client relationship — cannot recover the excess from a co-defendant or from their own insurer beyond the true indemnity value of the claim.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.