There is a constant perception amongst law firms that their PII policy covers them for anything and everything that may befall them during the course of their business. The cover is broad but relies on some housekeeping rules. Here are some examples of where claims aren’t covered;
• A claim arises from an activity which is not considered to be “private legal practice”, for example where the law firm acts as a banking facility for the acquirer of properties.
• Where a firm has significantly prejudiced their Insurers defence of a claim.
• Fraud involving other partner/directors in a firm.
• Late notifications where the firm have changed Insurer, and where there are arguments for and against one particular Insurers dealing with the claim.
• Where the firm have not complied with the Insurance Act duty of disclosure of all material facts to the Insurer (this usually only comes out when there is a claim and by then it’s too late as the Insurer can decline the policy ab initio).
• Large and/or complex losses such as Axiom Ince, where Insurers will investigate all aspects of the loss and look for weaknesses in the clients case if they have not followed protocols or there is a suggestion of contribution towards the loss.
A good example of the last point is that of Friday afternoon frauds (the period some years ago when bank telephone lines were being hacked and the felons were masquerading as the bank, in order to dupe a cashier into asking them to process some transactions beyond the 5 o’clock cut off. One particular Insurer stated that some law firm staff aided and abetted the loss due to their behaviours.
The uncomfortable partner or board meetings where the responsible individual has to pitch up to colleagues saying they think they are covered but the Insurer has reserved their rights means that the firm must reserve for the loss themselves until they know – it is often distracting and can be catastrophic.
Most Insurance brokers work on the basis of price alone and are transactional – they will push the renewal process through and move on. It pays to direct attention to the scope of policy cover and how the claims process does and doesn’t work, because not all losses are straightforward and not all Insurers react the same – some take an adversarial approach whereas others will step up to the plate.
For more information contact QPI on info@qualitypi.co.uk
QPI – quality, professionalism and integrity.