PII: Hard to decline claims against solicitors
More than half of professional indemnity cases issued in the High Court over the past five years were against solicitors, according to new figures.
However, when looked at by size, accountants have a significantly higher average value of litigated claim at £97m, almost 20 times higher than any other profession, with solicitors coming in next at £4.8m.
Researchers warned of “continued litigation” arising from the failure of accumulator law firms and those involved in volume claims litigation.
The analysis of professional indemnity by City law firm CMS used data from litigation analytics platform Solomonic for the 792 professional indemnity claims issued in England and Wales between January 2020 and June 2024.
Some 476, or 56%, of them were against solicitors, with construction the next most targeted sector at 14%.
“This substantial concentration of professional negligence claims within the legal sector can be attributed to the highly regulated nature of the industry and the extensive range of services provided to a vast number of clients,” CMS said.
“Any error in this field can result in a direct loss for the client, thereby increasing the likelihood of claims.”
Another factor might be that solicitors’ indemnity policies “give rise to very few opportunities for declining claims”.
The volume of claims against solicitors over the past few years was “fairly stable” and if anything had “slightly fallen since the second half of 2022”.
Just over half of the claims (240) had been resolved, primarily via settlement (88%), which on average happened after 13 months, quicker than for other professions.
As well as the high cost of litigation, reasons for settlement “may include a preference by solicitors/firms for quick settlement to avoid trial publicity and protect their reputation, or a greater appetite for an early commercial settlement amongst solicitors’ professional indemnity insurers”.
CMS found that claims against solicitors predominantly involved allegations of breach of contract, negligence, breach of fiduciary duty, and breach of trust.
Banking and finance featured heavily – they “frequently involve allegations of negligent advice or mismanagement of financial transactions” – while the data included several high-value claims on buyer-funded property developments, large-scale commercial projects and financial transactions.
“The involvement in these claims of high-profile law firms and multiple parties underscores the significant financial and reputational stakes involved in professional negligence claims against solicitors,” CMS said.
Researchers said in recent years had seen “a significant increase in claims arising from the failure of high volume consumer claims businesses involving not only clients of failed firms who have sustained unexpected personal liability for adverse costs, but also insurance coverage disputes and claims involving litigation funders and ATE [after-the-event] insurers”.
They went on: “Looking ahead, we expect to see continued litigation arising from the failure of accumulator firms, those involved in volume claims litigation and an increase in litigation relating to pensions, pending intervention from the government to retrospectively approve pension scheme amendments.”
There had also been a “notable increase” in litigants in person (LiPs) issuing claims against solicitors in 2023.
“The cost of living crisis coupled with inflationary pressures on solicitors’ rates, as reflected in the increased guideline hourly rates issued by the Judicial Office in December 2023 and adopted by the Master of the Rolls from 1 January 2024, is likely to mean that this trend will continue, bringing its own challenges as the parties seek to navigate complex legal and regulatory issues inherent in claims with unrepresented parties.
“In our experience, PI claims against solicitors brought by litigants in person tend to have a longer lifespan and are disproportionately more expensive to defend than those where the claimant has its own legal representation.”
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