Notifying insurers of circumstances


Now that the professional indemnity renewal season is out of the way for another 12 months, solicitors should be careful not to forget about insurance. Several firms will have changed insurer this year, so it is doubly important to make sure that the relationship between insurer and insured gets off on the right foot.


One point to remember is that all law firms are obliged to notify their insurers about any circumstances that may give rise to a claim. Failure to notify insurers of circumstances will be viewed dimly and may have serious consequences for any subsequent claim. It is a long procedure to trawl through files and documents to find circumstances that may have been missed, so it is sensible for all firms to have procedures in place to facilitate early notification. When creating and implementing such a system, there are five key points to consider:


- Staff awareness - any member of staff is capable of making an error that may result in a claim. It is therefore essential that all staff are made aware of the need to report potential circumstances to their partner, who will decide whether the insurer needs to be notified.


- Culture - it is important that firms create the correct culture in which staff feel at ease approaching partners with potential problems, without fear of recrimination or dismissal. This procedure will identify if any fee-earner needs further guidance, training or supervision and may avoid storing up problems for the future.


- File audits - regular file audits may identify potential problems with a fee-earner as well as being a useful risk-management tool. A cross-range of files should be checked, especially those files that appear to have been open for an inordinate time. This procedure should give an accurate picture of the standard of work, and where there are concerns about a fee-earner's files, a more detailed audit can be implemented.


- Circulars - all fee-earners should be kept aware of their responsibility to report circumstances and it helps to send out memos, say quarterly, asking fee-earners to advise of any potential problems.


- Complaints - complaints to the firm can help to identify where things are going wrong, so it is advisable that a check is carried out to see if there are circumstances within the complaint which should be notified to the insurers.


Monitoring of casework can reduce the number of circumstances that may lead to a claim and will help to foster good working arrangements with insurers.



This column was prepared by AFP Consulting, a Division of Alexander Forbes Risk Services UK Ltd