The highlights from the discussion, which took place under the Chatham House Rule:
Hardening PII market
The professional indemnity insurance (PII) market is hardening. There have been significant increases in premiums for April 2021 renewals driven by negligence claims.
Real estate and litigation generate most claims...
In terms of practice areas, real estate generates the largest number of claims, followed by litigation.Across all law firm sizes, some 50% of claims are from real estate, while litigation including personal injury and property litigation make up 30%.
... but high-value corporate claims on the rise
Corporate claims are infrequent, but tend to be classified as "high severity", and constitute 20% of the total.
Moreover, the number of corporate claims is on the rise, and is expected to continue on this trajectory following a boom in mergers & acquisitions driven by the current economic climate and pandemic impacts. Unfortunately as the economy recovers, we can expect to see sellers regret the price achieved as they had a weak bargaining position at the time.We can expect some of the unwilling and remorseful sellers to litigate with the potential for claims to exceed £10 million.
Procedural errors drive claims
An analysis of 10 current matter files revealed, perhaps surprisingly, that all claims originated from procedural errors rather than actual legal advice. This is a remarkable finding, in that it is relatively easy for firms to protect themselves against such claims.
Key questions are what leads to claims both at a technical and human level, and what could be done to prevent these errors?
Ensure properly scoped retainer letters
Failure to accurately define and document the scope of the work to be done in a retainer sent before work starts can leave firms open to potential claims.
If law firms position themselves as being commercially aware, for example, then there are distinct advantages to issuing a retainer letter that explicitly restricts the scope of services to an area or areas of legal practice. Failure to do so can lead to expectations that the solicitor has been engaged to provide advice on broader business matters.
... get sent out on time!
No matter how carefully scoped the retainer letter, it’s no use if it’s not sent to the client in a timely manner. Omitting to send out a retainer letter until after the work had been done and the alleged negligent act has already occurred is a recipe for disaster. While skill is required to draft a retainer letter with a tight scope and enforceable limitation of liability, there is potential to leverage technology to enforce procedural hygiene.
For example, a system that prevents time being recorded on the file unless a written retainer is sent out within a certain number of days after the firm has been instructed, could help ensure proper processes are followed.
Take attendance notes
Attendance notes taken at the time of discussion with the client, or at the earliest opportunity after, can help in the event of a claim. Modern technology offers the option to gather contemporaneous evidence, e.g. a voice memo.
Send notes to clients
While attendance notes can provide useful records, a note sent to the client can carry more weight. If challenged at the time by the client, the work carried out can be taken in accordance with the views expressed by the client and any issues can be actioned and hopefully resolved at the time.
Solicitors are human too!
While the implementation of appropriate processes and procedures can play a key role in limiting the likelihood of claims, it’s important to not forget the human dimension.
Worryingly, over 50% of solicitors surveyed said they were more likely to make mistakes when working from home, with causes including distractions, insufficient supervision, and poor working habits, particularly in relation to junior staff.
Three key themes emerged:
- Inadequate allocation of resources – a tendency for administrative matters in particular to be overlooked due to the assumption that someone else is taking care of them. For example, junior staff might assume they lack the seniority to undertake certain tasks, whereas senior staff might be under the impression that those tasks are the responsibility of someone more junior.
- Overenthusiastic assistance – reluctance to say "No" can lead to "mission creep" outside the experience or competency of the solicitor.
- Personal issues – it’s in the interests of firms to foster cultures that allow frank and open discussion of personal challenges. Identifying issues at an early stage can allow firms to offer support and prevent undesirable outcomes for both the individual and the firm.
Compliance for Law Firms virtual roundtables take place between noon and 1.00 pm on Wednesdays and are hosted by:
- Kate Burt, Solicitor, Head of Risk & Compliance and Regulatory Department Lead, Vincents Solicitors
- Steve Brett, Co-founder and CEO, E3 Compliance Training
The roundtables are run as closed sessions in order to promote open discussion. The Chatham House Rule applies to encourage open debate.
If you’d like to be added to the mailing list to automatically receive the weekly schedule of events along with the Zoom link for each session, please contact Kate Burt or Steve Brett.
Image: Perennis, CC BY-SA 4.0 (https://creativecommons.org/licences/by-sa/4.0), via Wikimedia Commons