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.

Setting up the Liability Caps feature in GoProposal takes minutes, here’s how…

Once you’ve got this feature set up, here’s 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 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 from our resident risk expert

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.

James Ashford

James Ashford

James is the Founder of GoProposal, Director of MAP., Keynote Speaker & Bestselling Author of "Selling to Serve". He helps accountants and bookkeepers around the world to price more profitably, sell more confidently and to give significantly more value to their clients.