Indemnity insurance

A single scheme joining up professional indemnity insurance and compensation funds across the whole legal services market – including unregulated providers – should be actively explored, the Legal Services Consumer Panel has recommended.

The defence protecting honest solicitors duped by mortgage fraudsters that was erected by the Court of Appeal last year has been reinforced by the High Court. A law firm can be relieved of consequential liability for a breach of trust if it acts honestly and reasonably.

The Solicitors Regulation Authority is holding firm against criticism over its position on unrated professional indemnity insurers after Latvian underwriter Balva – which covers 1,300 law firms – was prohibited from writing new UK business.

Two-thirds of law firms saw their professional indemnity insurance premiums go down last year, with switching insurers the most common way of securing it, Law Society figures have revealed. The society has also warned that under-pressure small firms are risking their future by going with unrated providers.

Last year was 12 months of unprecedented merger activity in the legal market. Experts are predicting that the trend will continue in 2013 with more mergers as firms seek to stay competitive by increasing their geographic spread or achieve shared critical mass in the marketplace.

Consumers believe regulators ensure they have protections when buying legal services – although they don’t really know what they are – and are content to pay extra for them, a survey of users’ perceptions has found. But they also expect lawyers to provide better information about their rights.

A professional indemnity insurer was wrong to reject a law firm’s blanket notification of possible claims, the High Court has decided in what is believed to be the first ruling of its kind. Meanwhile, the Law Society has issued a warning to solicitors to check potential insurers’ credit ratings.

Greater competition for business has led to a small fall in the amount of money solicitors paid for their basic professional indemnity cover this year, figures from the Solicitors Regulation Authority show. New entrants captured more than 10% of the market.

The number of applications from law firms to enter the assigned risks pool in its last year is back to pre-crisis levels, the Solicitors Regulation Authority has reported. This year the profession is liable to pay the first £10m in claims that arise from the pool.

Complaints from competitors that a law firm is engaging in predatory pricing are difficult to deal with, the Solicitors Regulation Authority admitted last week. At the same time, regulators were urged to make it easier for firms to inform them about what other practices in their area were up to.