NEVER ignore a letter of demand (LOD) – no matter whether it has a basis in fact or not. That is sage advice from Whitbread Insurance Brokers to business leaders who, otherwise, may find themselves embroiled in a costly and protracted legal defence.

Whitbread claims teams have seen unfortunate repercussions from many businesses reacting to LODs – also known as a solicitor’s letter – either too late or in poorly informed ways.

That’s why Whitbread has developed a four-step strategy that it advises business leaders to take when they receive a letter of demand: don’t ignore a letter of demand; notify appropriate parties immediately; do not respond to the letter personally and do not admit liability; and finally, do not pay the demand. 

Whitbread Insurance claims team manager Renee Cassidy said a decisive approach to letters of demand is vital.

“If a third party believes you or your business is responsible for personal injury or damage, and they decide to seek compensation, your company will likely receive a letter of demand,” Ms Cassidy said.

“No matter how far-fetched a claim may appear, whether you believe it happened or not, an LOD is never something to ignore.

“Also known as a solicitor letter, a letter of demand is a formal notice demanding that the person to whom the letter is addressed perform an alleged legal obligation, such as rectifying some identified problem, paying a sum of money, or acting on a contractual commitment,” Ms Cassidy said.

“Most demand letters will include a deadline for action, and are often used to prompt payment, avoiding expensive litigation.”

Ms Cassidy said the legal definition of a demand letter, according to the Duhaime.org  Legal Dictionary, stated it often “contains a ‘threat’ that if not adhered to, the next communication between the parties will be through a court of law in the form of formal legal action”.

“Essentially an LOD is a demand of payment for damages or injury arising from an event involving the person or entity to whom the letter is addressed,” she said. These days, the demand can come in many forms including e-mail, a phone call or even a conversation in person.

“Your business may receive an LOD if another party alleges your business is legally responsible for third party injury or property damage; or compensation is sought.

“In today’s litigious society, the number of claims for property damage and personal injury have grown significantly. It’s important to note that even if an alleged claim appears ridiculous or unfounded at first glance, an LOD is something you must take seriously.

“If your company fails to address the issue early, the case could end up in court, where legal expenses can quickly escalate into tens of thousands of dollars – even if you’re not at fault.”

Ms Cassidy said Whitbread had developed four key steps business leaders should take when confronted by LODs:

1. Don’t ignore a Letter of Demand

“Under no circumstances should you ignore an LOD. Ignoring even the most preposterous LOD could see your legal situation escalate. We have seen even the most outrageous claims awarded with damages. For example: Damages sought for a torn jacket. An individual walked past an insured’s fence, and tore his jacket on a raised nail. This person then proceeded to send a LOD to our client claiming $80 to replace the jacket. Our client didn’t believe they were responsible for the costs and ignored the LOD.

“Unfortunately as the LOD was not addressed or reported in the first instance, the case went to court. The claimant was subsequently awarded with $1,200 in damages which our client was required to pay, along with the associated legal expenses incurred by both parties.

“Often we find that those who receive a LOD sit tight hoping it will disappear, but generally ignoring a LOD only acts to intensify the problem. If the issue is not dealt with, your business will likely be issued with formal legal action where the case may end up in court. As demonstrated above, this can make the initial issue a substantially bigger than it ever needed to be.”

If a case does go to court, a number of preventable consequences may arise such as:

• Legal costs – a court case will inevitably incur legal expenses and should the judge rule against your business’s case, you may also be required to pay the legal expenses of the third party.

• Excessive damages awarded – damages awarded against your business in court could be far greater than if the case was settled out of court (eg. the torn jacket case).

• Mental angst – involvement in a court case could cause anxiety for business owner(s).

• Reputational damage – court cases can sometimes result in unwanted publicity, leading to reputational damage to your brand.

• Limited insurance coverage – your public liability insurer may not cover the damages and legal expenses in full, particularly if there is a delay in notifying the matter to the insurer. In the insurer’s eyes, the huge costs associated with a case being heard in court could have been avoided, or significantly lessened if an LOD was dealt with when initially received. A suitable settlement for the demand could have been negotiated, circumventing the need to go to court. Based on a scenario like this, many insurers would not pay a business’s liability claim in full, because legal expenses could have been avoided. Insurers in general are unlikely to accept any avoidable legal costs.

2. Notify appropriate parties immediately.

Whitbread Insurance brokers always recommend businesses inform their insurance broker, and public liability insurer, as soon as a LOD is received. Benefits of early notification are:

(a) The insurer will take the situation off your hands. Once your business notifies your Public Liability insurer or insurance broker, the insurer will generally take care of the whole issue from the start on your behalf. This removes the need for your direct involvement in the dispute. The insurer will: Review the LOD and advise on next steps to take; and, if required, engage legal representation to protect your interests, and liaise with the other party and their legal team who are seeking damages.

(b) Expert advice from the start. Your insurer will know the best way to settle the claim, that is, whether it will be more beneficial to settle a claim out of court or not. They will be aware of win/loss trends in court for similar cases, and are in a position to make an informed decision on how to achieve the best and least costly outcome for the claim.

(c) Settlement out of court. The insurer will likely seek to settle the claim as soon as possible to avoid formal court proceedings. Early LOD notification to your public liability insurer can also give the insurer the opportunity to look at alternative ways to resolve the LOD, or share the cost of the damages with another party. In the torn jacket case for example, the home and contents insurer of the person seeking damages could have paid the claim.

(d) Legal expenses covered by insurance. Public liability insurance can cover your legal expenses associated with the claim for damages, up to the limit defined in the policy.

“Don’t be discouraged from reporting a potential claim to your insurance broker or public liability insurer,” Ms Cassidy said. “It is to your benefit to report early, even if the claim doesn’t progress.”

3. Do not respond to the letter personally and do not admit liability.

Instead of responding to the LOD, you need to inform your public liability insurer or insurance broker. The insurer will determine whether there is any negligence attached to the claim on your behalf. There in fact may be no legitimate claim, in which case they will work to have the matter dismissed. The insurer will then respond to the letter appropriately on your behalf.

You should never admit liability (fault) for the incident associated with the LOD. This could leave you open to legal action for damages, and prejudice the insurer’s position. It could be almost impossible to argue your case if guilt has already been admitted.

4. Do not pay the demand.

If your business receives an LOD, refer it to the insurer who will take control on your behalf. Paying the demand could be interpreted as an admission of guilt, leaving you vulnerable to further legal action. There are other things to consider:

Employees: If an employee suffers an injury on your premises you would typically refer the case to the relevant Work Cover authority. The structure around Work Cover differs between the various Australian states and territories – for advice on this, ask your insurance broker.

Products liability: A public liability policy does not cover claims relating to a specific product you may have sold or manufactured, which could result in a liability claim if third party damage or injury is caused by its use or consumption. To protect against events of this nature, a products liability insurance policy is necessary. This coverage differs from a public liability policy.

“Public and products liability insurance is designed to protect you and your business from significant costs associated with legal action as a result of your actual or alleged negligence that has caused third party property damage or personal injury, whilst acting in the course of your business,” Whitbread’s Victorian Leaders facilitator, Holger Schnabel said.

“To help ensure your public liability insurance policy responds effectively, if you receive an LOD, we recommend following the four key steps.”

Whitbread Insurance Brokers is an Industry Expert with Victorian Leaders, the organisation helping to develop the next generation of leading businesses in Victoria.

www.vicleaders.com.au

www.whitbread.com.au

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• This Whitbread insight article is not intended to be advice and you should not rely on it as a substitute for any form of advice. Contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to the website.

START-UP businesses looking to follow the ‘Lean Start-up’ approach currently favoured by Silicon Valley should pause and think it through carefully, advises Australian start-up specialist Evan Shellshear.

In Dr Shellshear’s experience, the Lean Start-up imperative may be more of a hindrance than a help to many Australian early-stage businesses. In fact, he has identified three specific situations in which the Lean Start-up approach works against a fledgling business. 

“We’ve all heard about the Lean Start-up and how it’s transformed Silicon Valley and the start-up world,” Dr Shellshear said. He is the CEO of Simultek, where he works with start-up businesses in all phases.

“However, as you would expect, it turns out the Lean Start-up process is not a perfect fit for everyone.

“The Lean Start-up approach to product and service development is all about discovering what your business assumptions are and testing the assumptions with experiments,” Dr Shellshear said.

“You create a hypothesis, run a test and then use the result of that test to improve your product or service and then keep iterating using the learnings to improve.”

Dr Shellshear’s research has identified three cases in which the lean methodology should not be used: when people’s lives depend on your product; when other people rely on your product to build theirs; and, as he put it, “when there are simply no hypotheses to test”. He is an Australian innovation thought leader and has recently published a best-selling book on Amazon: Innovation Tools.

“The problem with the Lean Start-up is like all new management trends: it gets hyped to the point of hyperbole and people try it in the wrong situations and become disillusioned,” Dr Shellshear said.

“Choosing the right service and product development model is unfortunately something you only get one shot at, so you’ll want to make sure the first iteration is correct …

“Before blindly using a lean methodology, ask yourself first, is lean right for you?” 

WHEN TO AVOID LEAN START-UP METHODOLOGY

When people’s lives depend on your product. “You don’t want to bring a product out on the market to test a hypothesis if people can be fatally injured due testing it,” Dr Shellshear said.

When other people rely on your product to build theirs. “Constantly iterating on a product which people rely on will mean that they will stop relying on it.”

When there are simply no hypotheses to test. “If you know the market conditions, the demand for your service and/or are simply providing a commodity, then get it out there and don’t waste time,” Dr Shellshear urged.

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SET TO CELEBRATE its 150^th anniversary in 2017, aged care services provider Royal Freemasons remains one of the most innovative and progressive organisations in Australia.

For more than a century, Royal Freemasons has innovated its facilities and services, collaborating with a range of industry partners and universities, to achieve its single mission, what it calls a “simple and principled aim” – to ensure its customers “live a secure, dignified and rewarding life”.

Royal Freemasons operates nine aged care and retirement homes of its own across Victoria and is collaborating with others on aged care services, including Masonic Care Tasmania.

Royal Freemasons chief executive Felix Pintado  said the organisation worked in partnership with the National Ageing Research Institute to develop new ways to continue meeting customers’ needs and aspirations as they transition through aged care.

Working with Deakin University, Royal Freemasons has in recent years improved staff skills base in mental health care and has also worked with La Trobe University on a project to up-skill staff in emotional intelligence (EI). This is all designed to contribute to a better customer experience.

Royal Freemasons has partnered with Alzheimer’s Victoria to stage the first ever conference looking at ‘intimacy as we age’.

Now expert staff members are involved in the State Government’s Medicine Senior Reference Group and we are involved in an international skills exchange program with SIM University Singapore.

So renowned has Royal Freemasons become in the way it innovates and develops more sensitive and efficient aged care, the organisation regularly receive visitors from overseas – most recently from  Japan, Malaysia, China and Singapore. – who are keen to learn about the facilities designed and built in recent times and, as importantly, how they are operated. 

A good example of the standing with which Royal Freemasons is regarded was the extraordinary recent visit by Tokyo Institute of Technology fellow and professor Takanori Shibata. He has invented a remarkable robot – in the appearance of a seal – which is getting great results in assisting people with dementia.

Prof. Shibata visited Royal Freemasons’ Copin Centre to personally reinforce how technology can play an important role in delivering a better quality of life for people in aged care. His robotic Paro seal was specifically developed as a therapeutic device to assist people managing dementia and has been successfully used worldwide to provide calming and caring of aged persons. The seal has been acclaimed by the Guinness Book of World Records as the best device ever developed for this work, helping dementia residents who have known behaviours such as agitation, wandering and aggression and who are resistive to standard intervention practices.

As a result of the visit, and through benefactors Aya and Keith Thornton, an initial eight Therapeutic Robot Seals have been purchased for Royal Freemasons our aged care customers who are managing dementia.

The robot reacts to the attention given by a person as if it was a child and has been shown to have very excellent therapeutic effects on the wellbeing of the individual. The initial rollout of the Paro seals has commenced and it will be continually monitored in order to evaluate and instigate further rollouts to other customers, to help improve their quality of life.

“I am proud to oversee a very special organisation caring for nearly 1600 older Australians,” Mr Pintado said. “To meet demand, we are growing our services and recently added 215 aged care beds and 40 independent living units to our mix. \

“We want to offer people the very best of care and exceed their expectations. To ensure this, we have carefully aligned our services to meet the Federal Government’s Living Longer Living Better Legislation.

“In recent times, we have built on a long-standing tradition of excellence by introducing a range of new, high quality and caring options. We are constantly endeavouring to exceed our customers’ exacting standards and am confident that we have exceeded them at our new developments Streeton Park in Heidelberg and Coppin Suites at Coppin Centre.”

www.royalfreemasons.org.au

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