Indemnity insurance

Law firms’ anti-risk measures are likely to be probed more thoroughly by insurers if the common professional indemnity insurance renewal date is abolished, according to a leading industry insider. He also revealed in detail a number of “creative accounting” techniques used by insurers to reduce their exposure to the assigned risks pool by declaring premiums that may be £60m less than actually received.

Solicitors Regulation Authority plans to exclude financial institutions from the requirement for compulsory professional indemnity insurance will drive some conveyancing firms out of business, the Law Society has claimed. The longer-term move to remove work for all commercial clients from the scope of the minimum terms and conditions of cover would be short-sighted, it adds.

Lawyers working alone in ‘silos’ present serious potential risks to law firms, but limiting partners’ autonomy can harm your practice’s bottom line, a conference heard last week.

Allowing the exclusion of claims by financial institutions and an end to every law firm renewing its professional indemnity insurance (PII) on the same day and are at the heart of Solicitors Regulation Authority (SRA) plans to shake up client financial protection arrangements next year. In a consultation being published today, the SRA also floats the idea of removing all corporate clients from the scope of compulsory PII cover from October 2012.

The High Court has ordered a solicitor to hand over client files to a mortgage lender despite his argument that those parts of them relating to the borrowers were covered by legal professional privilege. The judge ruled that express agreements between borrower and lender in each case overrode the right to privilege and confidentiality.

Professional indemnity insurers are to provide guidance for solicitors on the way the risk they pose is assessed as part of a push to ensure there is no discrimination in the renewal process. Following a meeting called by the Equality and Human Rights Commission, the Association of British Insurers also agreed to work with its members to review their proposal forms and the underpinning criteria used to assess risk, and review and report on the equality and diversity work undertaken by their members.

A company that runs two law centres has become one of the first two organisations ever to be fined for data protection breaches, after personal details of 24,000 clients were lost when an unencrypted laptop was stolen. A4e, a ‘social purpose’ company that jointly manages the Hull and Leicester community legal advice centres, was fined £60,000 by the Information Commissioner.

Legal Futures readers have been offered a 10% discount to Managing Partner magazine’s upcoming two-day conference, Risk Management for Law Firms. You need to book before 19 November to claim the discount. Quote booking code ‘LF10’. The conference, on 1 and 2 December, aims to help lawyers defend their firms against strategic and operational risk. Legal Futures is a media partner.

The Council of Mortgage Lenders has launched an investigation into the impact of more borrowers and lenders having separate legal representation as lenders continue to restrict their panels, it has emerged. It has also given a cautious welcome to the Law Society’s new conveyancing quality scheme and sounded a warning over suggestions that the requirements of solicitors’ professional indemnity insurance will be relaxed.

After all the predictions of solicitors’ professional indemnity insurance (PII) premiums going through the roof, figures from the Solicitors Regulation Authority show a 15% fall across the profession for 2010/11, back to pre-recession levels. However, there has been a massive 57% jump in the number of firms in the assigned risks pool.

Solicitors need to be vigilant about large debts being run up in their name as a result of fraudulent store card applications, Legal Futures Associate the Lawyers Defence Group has warned. The legal defence and advice organisation raised the alarm after it was revealed by one popular DIY store that a number of solicitors have been targeted in this way.

There are 383 law firms currently in the assigned risks pool, the Solicitors Regulation Authority has revealed. The news comes as the Association of British Insurers (ABI) gave a strong welcome to an independent report on the need for reform of professional indemnity insurance, saying the market can no longer tolerate periodic crises caused by a combination of “poorly enforced regulation and restrictive policy requirements”.

The escalating cost of professional indemnity insurance may mean the total premium pot for solicitors approaches £300m this year, the first time it will have exceeded the last contribution to the Solicitors Indemnity Fund, a leading broker has predicted. The news comes as a report on PII commissioned by the Solicitors Regulation Authority recommended a range of reforms to the scheme, including removing the minimum terms and conditions in relation to commercial clients, ending the single renewal date and no longer requiring insurers to cover firms that have not paid their premiums.

Solicitors have generally seen a “substantial increase” in their professional indemnity insurance (PII) premiums this year, the Law Society has reported. The society’s PII helpline also received complaints about short deadlines to accept quotes, variable quotes from the same insurer and brokers being “less than truthful” with solicitors.

Some 37 law firms in the assigned risks pool have closed since August, with a further 10 in the process of shutting their doors, the Solicitors Regulation Authority reported today. The firms have come to the end of the two years they were allowed to be in the pool.