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5 things to consider when referring your clients to another professional
Professional to professional referral is common practice in most industries. A referral can provide value to the client, the referrer, and the referee. Your client can benefit through a needed additional service, as well as, saving the time in finding an expert on their own. Referrals can also strengthen your value by showing your interest in the client's well being, and your connections in the industry.
However, referrals can also expand your liabilities in areas that you may not be aware. Your liability typically does not end once you have made the referral to another professional.
Here are five things to consider when referring your client to another professional.
1. Always keep the client's best interest in mind. This should go without saying, but referrals should not be made on a blanket basis. Each of your client's scenarios are unique and referring a client to another professional for unnecessary services may decrease your standing with your client.
2. Confirm that the other professional maintains Errors & Omissions insurance. This is important regardless of fee sharing agreements and/or indemnification clauses. The best position is to request a formal "certificate of insurance". You will have a formal record, and as a certificate holder you are entitled to be notified if their insurance is cancelled, or non-renewed.
3. Disclose the relationship to your client prior to the referral, and obtain a signed disclosure statement. This is essential if you are receiving fees, commissions, or any monetary value for the referral. Transparency is key to maintaining your neutrality.
4. Make sure the referral fees you receive are in-line with industry standards and in relation to the amount of continued involvement on your part. If your referral fee is higher than industry standards it implies that your role in the continued service is also greater than the industry standard. When reasonable do not accept referral fees, but rely on good-will to your client, and return referrals as compensation for your efforts.
5. Provide at least 2 or 3 referrals in each circumstance. Providing options to your client does not completely eliminate your liability, but it does increase the emphasis on their role in selecting the right match for their circumstances.
The above list is not all encompassing, but it is a start for you to consider in mitigating your liability. By implementing these items you will provide a better value, while protecting your firm and industry related partners.