What can go wrong?
Solicitors by their very nature are involved in stressful or contentious private affairs as well as complex commercial matters, so the potential for disgruntled clients to hold them to account when things go wrong is substantial. Allegations of negligent advice are made across every conceivable area of the law from a simple house purchase to a multi-million pound merger. Claims are also made for other “civil liabilities” as well as embezzlement of client funds.
Professional Indemnity is compulsory for solicitors in the UK and the minimum terms legal practices and sole practitioners must buy are specified by the Law Society and provided by approved insurers. Given its over riding objective is to protect the general public from “poor justice” it is generally considered to be one of the broadest wordings in the market (including, for example, full retroactive cover and non-disclosure) so extensions are only occasionally required.
Some Professional Indemnity insurers will only consider solicitors on an excess layer basis while scheme arrangements effectively “close off” other insurers.
What are insurers looking for?
The individual risk profile of the practice will be considered, as will recent mergers and acquisitions that have an impact on the practice’s insurance liabilities. Insurers will also take a keen interest in the practice’s internal risk management procedures (especially with regard to access to client monies) and any quality accreditations, for example Lexcel.
The following areas are among those considered to be high risk: residential and commercial conveyancing; personal injury work (in view of the number of claims that emanate from these areas); commercial work including due diligence and mergers and acquisitions (because of the complex nature and potential severity of mistakes made); work in unfamiliar overseas jurisdictions as well as the provision of financial services.
The experience, qualifications and disciplinary record of partners and employees is of paramount interest given the work undertaken and access to client funds.
Most insurers will have fairly specific ideas about the size and type of practice they are looking to insure so make sure proposal forms are completed early and work with a specialist broker to ensure access to the markets likely to provide the best deals.