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Liability Limitations

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What's the standard liability you limit yourself to your clients?  I have a new client at £425 a day and it's been advised that I should limit my liability to 3 x the day rate.  Is this acceptable or too little?

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By paulwakefield1
18th Dec 2019 13:22

It has to be "fair and reasonable" as well as agreed with the client. I would think three times the day rate would struggle to meet that definition. I would at least expect it to be greater than the total fee for the engagement and by a factor.

The ICAEW, if you are a member, has quite a lot of good guidance on this subject (except for actual quantum!).

Edit: Actually it may be accessible even if you are not a member. Try this: https://www.icaew.com/membership/regulations-standards-and-guidance/prac...

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By MrDSGrace
18th Dec 2019 13:34

Thanks for your reply and the link to the guidance. The one thing I struggle with though is that if it has been agreed on a day rate and not for a set amount of time how do you determine the contract value? Likewise, for all ongoing clients that pay a monthly fee this also applies? Hence why I thought that 3 x the day rate would be fair and reasonable, no?

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By JDBENJAMIN
18th Dec 2019 14:04

Haha! Not so anonymous now!

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Replying to JDBENJAMIN:
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By MrDSGrace
18th Dec 2019 14:12

I didn't mean to or even realise I had posted as anonymous!

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By paulwakefield1
18th Dec 2019 14:01

Look at it from the other way around. Say you do a week's work for £2,125 and your liability is limited to £1,275. I don't think the client would be impressed.

Or have I misunderstood and you are proposing 3 x the day rate x the number of days? Which I would imagine would be considered more reasonable but then you are on an open ever growing exposure so the days would need to be reset to zero periodically. Can the work be broken down into discrete elements or time periods?

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By MrDSGrace
18th Dec 2019 14:13

It's 1 day a month on a rolling contract

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By JDBENJAMIN
18th Dec 2019 14:04

I would be amazed if a court held that to be a reasonable limit! PII policies set the limit well into six figures, as do most model engagement letters. I am sure they would set it much lower if they they could.

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By SouthCoastAcc
18th Dec 2019 15:24

The big four seem to limited it to 4-5 times their fee in my experience.

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Replying to SouthCoastAcc:
ALISK
By atleastisoundknowledgable...
18th Dec 2019 16:41

Quote:

The big four seem to limited it to 4-5 times their fee in my experience.

I’m surprised they get away with that

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Red Leader
By Red Leader
18th Dec 2019 17:04

I limit it to the amount of my PII cover, so therefore high relative to the fee. Difficult for a court to say that's unreasonable, I think.

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