“Bumper years” of negligence claims against solicitors on their way, warns top broker

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By Legal Futures

17 January 2011


Holland: conveyancing claims will increase as interest rates go up

Solicitors are facing “bumper” years of claims for professional negligence as recession-driven legal actions start to bite, a leading broker has warned.

The latest High Court figures indicate that negligence claims against solicitors rose from 80 to 210 in 2009, which is more than any other type of professional indemnity claim, and Lockton has predicted that the figure will continue to rise.

Steve Holland, executive director, professions/risk solutions at Lockton, said the figures do not show when the work that gave rise to these claims was undertaken. “On average it takes two years between carrying out the work and a claim being made against a law firm. Added to which, it typically takes in excess of 18 months to get to the point of formal court proceedings.

“That is not to say that the first notice of loss is not the receipt of formal proceedings but the courts generally frown on any claimant who has not followed the pre-action protocols and allowed that process to run its course. On the basis that the peak of the recession was over two years ago, it could be arguable that a fair majority of the cases are not as a direct result of the economic downturn. However, if this trend is indicative, then one would expect 2010 and 2011 to bumper years for litigation, because that will take into account the cases reported as a result of recession-driven claims.”

Mr Holland said that those recession-related claims have been on the rise in the past 18 months, “we have seen very few which have actually got to the point of formal court proceedings so far. That said, we have seen an increase in the use of mediation over the same period”.

Looking specifically at conveyancing, Mr Holland said law firms are continuing to receive “fishing” letters from lenders looking to uncover breaches of the lenders’ handbook. Unlike the last recession, however, law firms facing claims are hitting back with attacks on lenders’ lending practices.

But Mr Holland said he expected claims to start increasing as interest rates go up and more borrowers default on their loans. “It will inevitably lead to litigation,” he said.

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