The deadline for renewing Professional Indemnity Insurance is looming for law firms and naturally the premiums associated with this insurance are a great concern for most law firms, and in particular smaller law firms.
Payments for insurance can constitute one of the largest costs to a business aside from salaries. Add to this the fact that where a practice is refused PI cover it can be forced to go out of business and it is clear that the renewal of PII will be weighing heavy on practitioners minds.
The Legal Services Board (LSB) is currently deliberating on whether or not to approve the SRA proposed cut on the minimum cover limit from £2m to £500,000. Nevertheless, the decision is a statutory one, and unless the LSB can bring forth good reason to not approve the change then it will go ahead as per the requirements of the Legal Services Act.
Despite this decision it is well known that the risk is high within the Conveyancing industry. In fact, in a recent survey carried out by Lockton Insurance Brokers earlier this year it was revealed that 70% of Professional Indemnity Insurance claims made against solicitors relate to property transactions. Conveyancing firms, both large and small, therefore need to ensure that they are carrying out best practice when it comes to due diligence and the protection of client money.
The threat of Vendor Conveyancer fraud is now omnipresent for firms who practice Conveyancing. The impact on a firm of being a victim of identity theft has been well publicised; significant brand damage, raised insurance premiums and lender involvement that can lead to removal from panels and being taken to court.
Following the decision in Nationwide v Davisons in 2012, Conveyancers were left feeling they could rely on the protection of s.61 Trustee Act 1925. However the subsequent ruling this year in the appeal case of Santander v RA Legal, stressed that the burden of proving the conveyancer acted “reasonably” is on the defendant, and has left Conveyancers somewhat confused and unsure as to how they may fare if innocently caught up in these situations.
How does a Conveyancer now prove that they acted honestly and reasonably, if the check that is required by the CML cannot be relied upon? Conveyancers of today must arm themselves with the best information in order to be satisfied that they are comfortable with transferring client funds. The ability to demonstrate due diligence and Outcomes Focussed processes is essential.
Lawyer Checker helps law firms evidence their lower risk profile for conveyancing transactions. By conducting a Lawyer Checker search on all transactions it sends a message to both clients and lenders that the protection of purchase and mortgage funds is a priority for your firm. Tracey Carr, Financial Crime Manager of Santander sums it up with ‘We have done a lot of work to reduce fraud but vendor conveyancer fraud remains an area of growing concern. That is why I welcome initiatives like Lawyer checker that help our panel firms manage the risk associated with transmitting our money to vendor conveyancers. All conveyancers should reassess the checks they make before they send money to organisations offering undertakings.’
In turn a Lawyer Checker search also allows your firm to demonstrate to an insurer that you take all steps necessary to protect vulnerable client and lender money, and in the worst case scenario will be able to provide evidence that you and your firm acted honestly and reasonably when conducting a conveyancing transaction. When making an application for PII it would be hoped that use of Lawyer Checker will evidence reduced risk and contribute to keeping premiums as low as possible.