When a client says your firm’s advice, report, design or work caused it a loss, treat the first message as a potential claim, even if it is only a complaint. Within days, tell your professional indemnity (PI) insurer or broker in the way your policy requires, keep every file intact, and do not admit liability, promise a refund or offer free rework without the insurer’s written consent. Then test the complaint properly: was there a duty, a breach, a loss caused by that breach, and is the claim within time? Your response in the first week often decides whether your cover responds at all.
Is a client complaint already a “claim”?
Often, yes, or close enough that your policy cares about it. Most PI policies are written on a “claims-made” basis. They respond to claims first made against the firm, and notified to the insurer, during the policy period. Many wordings define a claim broadly: a written demand for money or services, an allegation of a breach of professional duty, or the start of court or arbitration proceedings.
Even an angry email that does not yet ask for money can be a “circumstance”: something that may reasonably give rise to a claim later. Many policies let you notify circumstances during the policy period, so that a claim made years later attaches to the policy that was in force when you first knew about the problem. If you sit on it, a later insurer may exclude it as a known circumstance, and your current insurer may say you notified too late. Check your own wording.
The exposure is real: a client can sue in contract and negligence for its loss, plus interest and costs, and even a weak claim is expensive to defend.
What should the firm do in the first seven days?
- Log it and appoint one person to handle it. Record when the complaint arrived and what it alleges. Tell staff not to discuss it with the client or online.
- Notify the insurer or broker. Send the complaint, the engagement letter and a short factual summary. State whether you are notifying a claim or a circumstance. Keep proof of when you notified.
- Do not admit liability or offer compensation. Many policies contain a condition that the insured must not admit liability, settle, or incur defence costs without the insurer’s consent. Breaching it can put cover at risk. An apology for the client’s frustration is different from accepting that your work was negligent, but word it carefully and let the insurer see it first.
- Preserve the file. Freeze emails, drafts, version histories, working papers, call notes, timesheets and chat messages. Do not edit or “complete” documents after the event.
- Read the engagement terms. Look for the scope of work, any liability cap, exclusions of indirect loss, a contractual time bar, client responsibilities and the dispute resolution clause.
- Diarise deadlines. If a lawyer’s letter of demand sets a reply date, calendar it. A short holding reply, approved by the insurer, can confirm the letter is being reviewed. See our guide to responding to a lawyer’s letter of demand.
- Get legal advice. Insurers often appoint lawyers from their own panel once a claim is accepted. If you are uninsured, or the insurer has not yet confirmed cover, take your own advice early.
What will a PI policy typically do, and what will it not do?
Wordings vary, so treat this table as a guide to the questions to ask.
| Issue | What many PI policies typically provide | What to check in your wording |
|---|---|---|
| Defence costs | Lawyers’ and experts’ fees to defend a covered claim | Whether costs are inside or on top of the limit, and whether insurer consent is needed before costs are incurred |
| Damages and settlements | Amounts the firm is legally liable to pay a client, up to the limit | The limit per claim and in the aggregate, and any sub-limits |
| Deductible (excess) | The firm pays the first portion of each claim | Whether the deductible applies to defence costs as well as damages |
| Refund of your fees | Often excluded, or limited | Whether a fee waiver or refund is covered at all, and on what consent terms |
| Liability you agreed to in contract | Usually covers liability you would have had anyway at law | Exclusions for indemnities, penalties or guarantees beyond your legal liability |
| Dishonesty or fraud | Commonly excluded for the person who acted dishonestly | Whether innocent partners or the firm stay covered |
| Known problems | Excluded if known before the policy began and not notified | Prior and pending claims exclusions and the retroactive date |
| Control of the defence | The insurer usually has the right to conduct the defence and settle | Any clause about contesting a claim on legal advice, and what happens if you refuse a recommended settlement |
If your claim is declined, you have options. Our guide on what to do when an insurance claim is rejected explains the internal dispute, FIDReC and court routes.
Can we simply refund the fee to make the problem go away?
Sometimes that is commercially sensible, but an unplanned refund or free rework carries three risks.
- Cover. If you settle without consent, the insurer may refuse to pay, and many policies do not cover fee refunds in any case.
- Admission. An open letter saying “we got this wrong, here is your money back” can be used later as evidence of liability if the client then claims a much larger loss.
- No finality. A refund without a signed settlement agreement and release does not stop the client suing for more.
If the firm does want to make a goodwill offer, make it in a letter marked “without prejudice”, agreed with the insurer, and settle only on a written agreement that releases the firm (and its staff) from further claims about the same work. Our article on without prejudice letters in Singapore explains when that protection works and when it does not.
How do you test whether the client really has a case?
A complaint is not a claim that will succeed. Before anyone negotiates, work through the elements a client would have to prove. These are the same elements we explain from the claimant’s side in our guide to professional negligence claims in Singapore.
- Duty and scope: what exactly were you engaged to do? Tasks the client kept for itself may fall outside your duty.
- Breach: would a reasonably competent practitioner have done the same? This usually needs an expert’s view.
- Causation: would the loss have happened anyway, for example because of the client’s own decision or a market movement?
- Remoteness: not every downstream loss is recoverable, as the Hin Leong decision below shows.
- Contributory fault: did the client withhold information or ignore your warnings?
- Time: under the Limitation Act 1959, contract and tort claims generally must be brought within 6 years. For negligence causing latent damage, there is an alternative 3-year period from when the claimant had the necessary knowledge, subject to a 15-year longstop from the negligent act.
- Contract limits: a reasonable liability cap or exclusion in your terms may limit what the client can recover.
What happens if the client does not back down?
Under Order 5 of the Rules of Court 2021, parties have a duty to consider amicable resolution of a dispute before and during court proceedings. A claimant is expected to make an offer of amicable resolution before starting an action unless it has reasonable grounds not to, and such an offer must generally stay open for at least 14 days. A party who unreasonably refuses mediation or another form of amicable resolution risks adverse costs orders. Our guide to mediation before litigation explains the options.
If the client starts proceedings by an originating claim, deadlines become strict. A defendant served in Singapore must file and serve a notice of intention to contest or not contest within 14 days after the statement of claim is served, and a defence within 21 days after service. Missing these deadlines can lead to judgment in default.
What if the firm has no professional indemnity cover?
Then the firm pays its own lawyers, experts and any damages or settlement. In practice this means:
- defence costs come straight out of cash flow, even if the firm eventually wins;
- a large judgment can push the company into insolvency;
- the client may also look for a personal route, for example by suing the individual professional who did the work, which we cover in our article on when employees and directors are sued personally;
- other policies rarely fill the gap. Public liability policies usually exclude professional advice, and directors’ and officers’ policies commonly exclude claims arising from the firm’s professional services.
For a fuller picture of what PI insurance is and who should hold it, see our guide to professional indemnity insurance in Singapore.
Example: a marketing consultancy and a failed product launch
Example: a small consultancy prepares a market-entry report for a client. Six months later the client’s launch performs poorly and its managing director emails, blaming “your wrong numbers” and asking for the S$40,000 fee back. The consultancy’s founder replies within an hour offering a full refund “as we accept the data was flawed”.
Two weeks later, the client’s lawyers send a letter of demand for S$600,000 in lost sales, quoting the founder’s email. The consultancy’s PI insurer points out that the policy requires notification of circumstances and prohibits admissions without consent, and reserves its position on cover. A short acknowledgment, prompt notification and a review of the engagement letter (which limited the work to desk research and capped liability at the fee) would have left the firm in a far stronger position.
Cases from the news: what happens when firms face these claims?
Deloitte Australia refunds part of a government fee (2025)
As reported by the Australian Financial Review and widely covered in October 2025, Deloitte Australia agreed to repay the final instalment of an A$440,000 contract with Australia’s Department of Employment and Workplace Relations. An academic had found errors in its report, including non-existent references and a misquoted court judgment. A corrected version disclosed that a generative AI tool had been used in preparing part of the report. The department said the substance and recommendations of the review were unchanged. A quality failure can lead to a refund and public scrutiny even when the core advice stands.
Hin Leong’s US$2.6 billion trading-loss claim against its auditor is struck out (2026)
The liquidators of oil trader Hin Leong Trading (Pte) Ltd sued its former auditor, Deloitte & Touche LLP, after the company collapsed in 2020. In Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd [2026] SGCA 33, decided on 16 July 2026 and reported by The Business Times, the Court of Appeal struck out the claim for about US$2.6 billion in trading losses. It held that those losses were too remote: the auditor had no role in the company’s trading. The court did not decide whether the auditor had been negligent, and the rest of the claim was not struck out. The amount a client demands is not necessarily the amount it can recover.
Frequently asked questions
Should we notify our insurer even if we think the complaint is baseless?
Generally, yes. Most PI policies require notice of claims, and many encourage or require notice of circumstances, whatever you think of the merits. Late notice is one of the most common reasons cover becomes disputed.
Does a liability cap in our engagement letter end the matter?
Not automatically. A cap may be challenged as unreasonable under the Unfair Contract Terms Act 1977, or argued not to apply to the claim made. It is still a strong negotiating point, and you should show it to your insurer and lawyer at once.
Who decides whether to settle, us or the insurer?
Under many PI policies the insurer controls the defence and settlement of a covered claim, after consulting the firm. If you refuse a settlement the insurer recommends, some wordings limit what the insurer will pay. Check the clauses on claims control and consent in your policy.
Can the client sue our staff member instead of the company?
It can try, especially if the individual dealt directly with the client and assumed personal responsibility. Many PI policies extend cover to employees and directors for work done for the firm. Check who counts as an insured under your policy.
Official sources: Singapore Courts, how to respond to an originating claim; Supreme Court Practice Directions 2021, amicable resolution of disputes; Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd [2026] SGCA 33; Limitation Act 1959; Rules of Court 2021.
Insurance cover itself should be arranged and reviewed with a licensed insurer or insurance broker regulated by the Monetary Authority of Singapore.
Need help with a client claim against your firm?
If your company, or you as a director or shareholder, is dealing with a client complaint, a letter of demand or a claim that your firm’s work caused a loss, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, for example if a claim is made against your company or you are sued, we will refer you to a firm on our panel of Singapore law firms that regularly handles professional negligence and commercial disputes. Raffles Corporate Services is a corporate services provider, not a law firm or insurer, and this article is general information, not legal or insurance advice.
The Raffles Corporate Services Editorial Team, Raffles Corporate Services