Solicitors’ PI rate rise on the horizon due to Covid-19

Claims against solicitors could increase if there is an economic recession post-pandemic, Insurance Times has heard.

These claims against solicitors arising from the pandemic are twofold – claims arising from constraints caused by home working and those due to a Covid-19 induced economic recession, according to Paul Castellani, professional indemnity specialist at the Forum of Insurance Lawyers (FOIL) and partner at law firm Kennedys.

He told Insurance Times: “In the longer term, if there is an economic recession, we would expect - consistent with previous ones - claims against solicitors to increase.”

Therefore insurers seem to be preparing for potential claims in solicitors’ professional indemnity insurance with a 30% rise in premiums.

Economic downturn

Castellani, said: “It is less likely that we will see a glut of lender claims as we have in prior recessions, and so we expect more claims will arise out of transactions in both the corporate and property fields which looked good commercially prior to the recession but look less so when the economic position worsens.

“These could include transactions which had deferred consideration contingent on future events such as earn outs by selling shareholders or overage agreements in a property context.

“Claims in relation to wills and probate will also likely increase.”

This is likely, as many wills have been prepared in a rush over the last six months while the UK was in lockdown. This means that concerns will be expressed, post death as to testamentary capacity or the manner of execution.

“This, allied to general trends such as the increase in second marriages and hence larger extended family groupings, is likely to cause more disputed beneficiary or Inheritance Act cases, which solicitors can often become embroiled in, particularly if capacity was not properly explored,” he added.

Home working

Meanwhile, in a home working environment, it is likely that collaborative working and supervision became more difficult.

For example, advice may have been given without access to all relevant documentation or data if some of that was physically located in the office.

He added: “Hence, we would expect to see claims arising from mistakes by less experienced practitioners which would have been picked up if effective supervision was in place.

”Home working environments may also lead to a greater risk of data breaches – through the use of home IT systems which may not have the same level of security as office ones or misplaced physical papers.”

Read more…Post-pandemic recession could spell more trouble for solicitors professional indemnity insurance 

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