Todd Davison, MD, Purbeck Personal Guarantee Insurance
By Todd Davision, MD at Legal Futures Associate Purbeck Personal Guarantee Insurance
As the April 2022 Solicitors’ PI renewal season comes to a close (typically a fraught time for the leaders of Solicitors’ firms given the recent rises in premiums and the increasing requirement for Personal Guarantees as a condition of cover), it is with some irony that some of the same issues impacting Solicitors’ firms are causing legal work to ramp up from the wider business community.
This is good news on the one hand but not so great if finding skilled people has become a key challenge for your firm. Smaller firms feel the impact of staff losses far harder than larger businesses and currently face the ‘great resignation threat’ as people have left the workforce and unemployment nears a record low. In fact, a recent survey by Purbeck Personal Guarantee Insurance found that 50% of workers within SMEs have ambitions to start their own business.
Aside from skills shortages, the impact is being felt from Brexit, supply chain issues, fuel price increases, the cost of materials and now a war in Europe. Businesses are feeling the pressure on all sides. This heady mix is contriving to create legal problems with customers, employees and suppliers.
The MD of ARAG, the legal expenses insurer said in a recent article that the business is seeing a spike in legal disputes and increasing demand for legal expenses insurance, particularly around Employment Practices Liability.
At the start of the pandemic, the insurer saw a huge spike in calls to their legal advice helpline, particularly around employment law.
We also felt the impact at Purbeck Personal Guarantee Insurance – we received many calls to our mentoring and support team from business owners with personal guarantees in place for business loans, who saw their custom disappear overnight.
Now we are reaching the other side of the pandemic, the challenges are quite different as firms bring back staff to the workplace, many with different mindsets and as ARAG’s MD has stated, while furlough certainly softened the blow, employment disputes are a growing risk for businesses of all sizes.
Added to this are contract disputes and legal cases around the Government support offered during the COVID-19 crisis.
Those smaller Solicitors’ firms who have secured their Solicitors’ Professional Indemnity Insurance cover for the next year can at least rest assured that as works ramps up in response to demand from their business clients, they are fully protected if things go wrong. The one remaining niggle could be around a personal guarantee requested from their insurer in order to secure the cover. This could put their home and personal assets at risk if the practice fails.
October is the next Solicitors’ PII renewal season. Those firms renewing at the latter end of the year should consider taking the extra step of taking Professional Risks Personal Guarantee Insurance. The policy provides insurance cover for the Directors of solicitors’ firms that have provided Personal Guarantees for Professional Indemnity Insurance (PII) run-off premiums. The cover applies where the run-off premium cannot be met by available cash resources of the firm.
If there’s one lesson learnt from the past two years, no-one can predict what the future will hold and if there’s a possibility of reducing risk to a Partner/Owner’s home and personal assets, it should be grabbed with both hands.
