As we come to the mid-point of the PII season, I thought I would review how things are going.

Anecdotally is appears that the SRA’s mooted reduction of limits of indemnity (LOI) to £500,000 has led to firms holding off renewing at the usual £2/£3,000,000 perhaps anticipating premium reductions. As we all know this is not going to happen, firms will need to renew for their usual level of minimum cover.

Policies are written on an “each and every claim” basis so the LOI covers an unlimited number of losses during the period of insurance. Outside of the very large firms, it is (just about!) unheard of for an insured to, say, have three total losses. What is much more likely is a series of smaller losses measured in the few £’000. Therefore, do the majority of UK law firms really need to have such high levels of cover?. As a ‘sop’ to both insurers and solicitors the bigwigs at the SRA have had the idea that allowing firms to insure at lower levels will reduce premiums and insurers’ exposure to potential costs. ‘Win win’ for all apart from maybe the consumer.

I cannot find any reliable statistics for claims reserved and claims paid but using our experience here at QLP, few claims exceed £500,000 and indeed most settle below £100,000.   Underwriters will already have factored this into their premium calculations (fees, claims experience, areas of work) and any subsequent reduction in the compulsory LOI is unlikely to have any bearing on premium levels.

From a personal point of view, I would rather be over insured rather than under insured. Most people need some sort of insurance and hope that no claim is made as it means something has gone wrong. Having said that, in a claim situation I have never known anyone to say the premium is wasted?

Ultimately PII is a financial tool that protects the assets of a business, in other words your wealth, particularly if you are part of a traditional partnership. It also gives comfort to those using lawyers that if anything goes wrong, there is a means of compensation. Certainly it is common practice for solicitors’ corporate clients to take an interest and ensure their legal representatives are adequately covered.

We all know claims come from the most unexpected sources and can bite hard. Maybe, just once in a career, along comes the biggie. Full cover is a sleep easy, I am covered, no need to worry (well not about that anyway, plenty of other subjects to fret over).

MARKET UPDATE

Competitive quotes all around, if anything the running is good to soft (to use an horse racing term) with renewals around about last year’s levels, assuming things have not gone pear shaped over the last 12 months and you are getting the benefit of your premium.

N.B. The Law Society has commented that solicitors should not delay their Professional Indemnity Insurance (PII) renewal this year. Have you?

Coventry and others v Lawrence and another (No 2) 2014 UKSC 46 (Article 6 of the ECHR, the right to a fair trial).

The case of Coventry has caused a bit of a stir and alarm, probably only momentarily!

With the Supreme Court looking at the recoverability of CFAs and ATE premiums, what does it mean for us? Post Jackson uplifts and ATE premiums are not recoverable from defendants anyway, but what if the door is opened to look again at pre April 2013 cases still in the pipeline and those that have gone before. This is exactly what some commentators are flagging as a possibility in the still to be concluded Coventry case.

Changing the rules “after the event” is worrying as a principle and what about those claimants who in good faith took out an ATE on the basis of recoverable premiums? I can only foresee previously viable claims having to be discontinued, solicitors writing off WIP, overall this is yet another blow to the less well-off trying to get justice. In my view this is totally at odds with ‘Anglo Saxon’ justice for all.

For ATE claimants, solicitors and insurers, the worry I have is that defendants will use this opportunity to their advantage and delay cost settlements. Yes, defendants will say to claimants that cost settlement will be ‘pending the outcome of proceedings’ (to those defendant solicitors reading this, we understand even if we do not appreciate).

Notwithstanding the above, the Coventry ruling does not allow defendants to refuse to pay success fees and/or ATE premiums in the interim, clearly stating that defendants are still liable to pay claimants success fees and ATE premiums under the Access to Justice Act 1999. There is anecdotal evidence that the SCCO has rejected a number of applications for a stay/adjournment in success fee/ATE premium costs cases until the Supreme Court makes its mind up, the Court having delayed any judgement until the Government has had a chance to respond, (will we see the Attorney General once again personally representing the Government?).

The big problem, potentially, is for the Government. Under Article 6 (the right to a fair trial) of the ECHR, if the Coventry argument is successful, the potential for defendants’ compensation claims, could amount to tens of billions of pounds.

If the decision is ultimately in favour of Coventry the consequences for pre April 2013 CFAs and ATE insurance policies is that CFA uplift and ATE insurance premiums would no longer be recoverable from defendants and strictly would be paid from any recovery or other assets if any. To the lawyers reading this, would the Government have to compensate any losing party who has been ordered to pay CFA uplift or an ATE insurance premium, or indeed costs going back to 1999 and the Woolf Reforms? The government and the judiciary will not want this can of worms to be opened and it is likely that a ‘pragmatic’ decision will be made. Nevertheless, it is a fascinating situation that feeds into the current national focus and debate on who makes the laws of the Country, the national government or an intra-national organisation.

The AvMA conference in Brighton last weekend was a great success. Thank you to everyone who came to see us, who asked questions, asked for more information and put their card in the draw for a bottle of Bollinger. (See our tweet of the 2^nd for the lucky winner.)

The recurring theme in all our conversations with delegates was funding. I know that we have been saying this for a while but it really is ever more apparent that the cashflow v. claimant requirements is an increasingly difficult equation. The smaller value Clin Neg cases are simply being squeezed out of the market at the same time as balance sheets are being squeezed under the weight of disbursements. There is no getting around the fact that claimants need to be realistic and that they must now be part of the on-going discussions and involved from the outset.

Where and when this will lead to is to my mind the accounting truth: businesses fail through lack of cash. We do not intend to create an Armageddon scenario, rather point out that there is a solution. Disbursement funding is available through QLP and it is fair and affordable. Claimants’ liability is ring fenced, is back ended and comes with full protection under Consumer Law.

We were also impressed with some of feedback on the usefulness and topicality of the breakout sessions which covered everything from frozen shoulders (Andrea has been there) to the very on message feedback from the diabetes session, “sugar is bad”.

Please see our blog of 5^th March 2014, QLP funding – funding for clinical negligence (CN) cases.

It’s a funny old world.  The iconic Lloyd’s building in Lime Street (London not Liverpool) is now owned by the Chinese.  This is a grade one listed building, occupied by Lloyd’s of London,rumours abound in the London Insurance Market that Lloyd’s are looking for a new home.

First thing that springs to mind, what will be the building’s new name?  After all wherever Lloyd’s ends up will be known as The Lloyd’s Building.  Its only in the last few years that the ’58 building has been redeveloped (knocked down and replaced), its now the Willis Building.

Lloyd’s is one of the largest insurance markets in the world, it has been going for hundreds of years and has created many new areas of insurance.  One thing has been constant during the centuries, business is done face to face.

In this modern age with all our electronic gadgets, increasingly things are done in the ether.  There is no need to meet face to face, sometimes not even a telephone call.  However, whilst we embrace the new we still stick to the tried and tested ways because they work, it is easier to work with someone you know than a bland email.  Our chaps wonder around the country talking to people, making contacts and establishing relationships.  It works, its amazing how long these meetings last in peoples’ memories.  Sometimes it can be a year or more, we then get a call, can you help?  We can!

If you want to meet, get in contact.

We have all seen the cookery shows on the telly, perfect recipes cooked to perfection (mostly!).  Well we can look at Professional Indemnity Insurance in the same light, before we start to cook our recipe, we need to look at the ingredients.  There are two parts to the process:

Insurers – come in two flavours, plain (unrated) and self-raising (rated).  Each has its own part of the market, plain is usually looking for up to 10 partner firms and typically many rated insurers have limited appetite below 10 partners.

Brokers – again they come in many flavours, including producing brokers who find the solicitors firms, placing brokers who find the insurers and general brokers who do both.

So how do they all mix?

Bigger law firms usually have a relationship with a large broking firm.  They agree a fee and the broker will supply all their insurance needs, these are usually long term and established relationships.  The bigger (rated) insurers tend to prefer these relationships.

For the rest of us it’s a little more complicated, because in recent years there has been a scarcity of affordable rated insurers looking at less than 10 partner firms the unrated market has risen in importance. We need to be able to separate the good from the rest as buying the cheapest ingredients doesn’t always make for a happy mix.

Unrated insurers carry reinsurance (basically insurance on insurance) and looking at the reinsurers we find that some are rated.  This should provide comfort.

Back to the recipe, ingredients are next, no broker has access to the whole market, some insurers will only deal with brokers, sometimes only one broker, solicitors cannot access these markets directly. QLP can, we become sub-brokers to access these markets.  For firms the core ingredient for a good PII season is the application form, a fully complete form will give the underwriter a quick way to see if they wants to dig deeper, they will then produce a set of requirements (ingredients) they need to take the matter further.

Fortunately we have a good idea as to these ingredients:

• Application      form, fully completed
• Full      disclosure of claims history (6 years worth)
• Copy of      firm’s headed paper (one sheet of paper)
• Supplementary      questionnaires (eg conveyancing) as required
• Firm’s      accounts (last 2 years)
• Explanation      of any niggles

All bound together in a nice neat bundle.  The better quality the application pack the more time an underwriter will take to look at the package.

With all renewals on the same day (it will take time to spread throughout the year) underwriters need to distil the deluge of applications down to the ones they want to offer terms on, the easier we make it for them the better the chances of a competitive quote.

Every year there are thousands of cakes presented, you need to stand out.  Of course there are a number of things you must not do, for example, paper the market, send an application to all and sundry, that generally ends in a no.

We know underwriters and their likes, we can tailor an application to a particular market, we can improve chances of success and take all the drag out of an application.

So the motto is clear, ‘Start early to get a reasonable quote’.