What is the Master Policy? The insurance every Scottish law student and trainee needs to know about

 Here we’ll take a look at the Master Policy insurance for Scottish law firms and Lockton’s role as your broker.

Did you know that the majority of claims against Scottish law firms are the result of practical errors rather than errors in law? If you did, then you may already have been to a Lockton risk management session! If you did not, read on…

Whether you are looking forward to starting your training contract, starting out as a newly qualified solicitor or taking on your first role in a law firm, there is much to master. From case management systems and data protection regulations to where to buy lunch and how to work the coffee machine, the learning curve is steep.

One topic that you may not necessarily hear much about as you begin your career is the professional indemnity (PI) insurance arrangements for your firm. PI insurance is important and having a basic knowledge of how this works for your firm will give you valuable insight as you learn your role.

The need for professional indemnity insurance

In life, mistakes are inevitable. You will do all you can to avoid them, but you also need to be prepared for when they do happen. The same is true of the day-to-day running of a law firm. Most errors in practice, when tackled head on and addressed properly, can be fixed without any lasting consequences. However, where an error or omission does lead to a financial loss for a client and then a claim to recover that loss, it is essential that a law firm has PI insurance in place to provide some protection from economic loss if necessary.

Unlike in England and Wales, Scottish law firms benefit from a Master Policy – a professional indemnity insurance arrangement that covers all Scottish solicitors working in private practice.

What is the Master Policy?

Key elements of the Master Policy:

• It provides up to £2 million of cover for any one claim, subject to a self-insured amount (SIA) payable by the firm.
• It operates on a claims-made basis (a firm must have Master Policy cover in place at the time a claim is made against it).
• The lead insurers are Royal & Sun Alliance (RSA) supported by a number of co-insurers.
• It is a civil liability policy with a very wide basis of cover.

The Master Policy has been in place for 47 years. It is compulsory for every firm regulated by the Law Society of Scotland, providing cover for sole practitioners, large multi-office practices and everything in between.

Each firm pays an annual premium for their Master Policy cover, which is calculated by taking several factors into account, including:

• Number of principals (partners or directors) in the firm.
• Fee income.
• Types of work.
• Claims record.

Who are Lockton?

Lockton are the world’s largest privately owned global insurance broker and we have the privilege of being appointed by the Law Society of Scotland as the broker and administrator of the Master Policy. This means that we are here to support every law firm in Scotland and our Master Policy team in Edinburgh is here to help with all aspects of PI insurance.

Each year we process the renewal of Master Policy cover for all Scottish law firms. All renewals must be processed by the 31 October. (Halloween for us is less about ghosts and ghouls and more about proposal forms and premiums!)

Our appointment includes much more than renewal. We also receive initial intimations from Scottish law firms when they need to tell us about a claim (or a circumstance that could become a claim). We record all intimations and pass the information to RSA’s dedicated claims handling team, who will then work with the law firm to resolve matters. When a firm becomes aware of a claim or circumstance, they should notify us promptly. This means the firm will receive the support of the insurer’s expert claims team at an early stage. (The decision whether to intimate a claim or circumstance does not rest with the individual fee-earner; there will be someone in your firm whose role includes responsibility for intimation. Your first port of call if you are concerned that something has gone wrong should be your own line manager.)

As the first port of call for intimations, we can review trends and common causes of claims. We know that most claims are caused by practical errors – for example the missed deadline, the unregistered deed or the lack of a file note. We use this insight to provide comprehensive risk management training for the profession.

Our risk management associates are qualified solicitors with many years of combined experience in private practice. We cover all aspects of good risk management practice in our training and we are always keen to speak to firms who would like to discuss their training needs. We also provide a wealth of online materials on our Resource Centre, including articles, guides, template documents and CPD-verified online modules. 

What next?

Now that you have been introduced to the Master Policy, we recommend familiarising yourself with its key benefits. For more information, check out our interactive Guide to the Master Policy.

Next, take a look at our Resource Centre; we hope you’ll find the materials useful as you start to think about risk in the context of your own role.

Look out for future training sessions from Lockton. Speak to your firm if you think there is an opportunity for Lockton to provide training as we are always happy to explore how we can help.

Think about how you can keep risk management in mind as you learn. Follow all the procedures and processes at your firm. If you are not sure about something, always ask, You can never ask too many questions, and your manager will be glad that you are speaking up. If you make a mistake or you don’t know how to proceed with a particular file, always speak to your line manager, or someone else who can help you. Don’t be tempted to sit on a problem and hope that it will go away – it won’t! An error that is dealt with at an early stage is far less likely to lead to a complaint or a claim.

Finally, we are here to help and are always happy to speak with you, so for any queries please contact Matthew Thomson or Anna Forsyth.