Some of the recent risk management-related enquiries from solicitors to the Master Policy brokers

I am to deliver risk management training to trainees and NQ staff in our office. What common themes in claims experience should I be highlighting which apply across all practice areas?

Perhaps the single largest common denominator across practice areas is communication, or rather miscommunication. In risk terms, so many “moments of truth” in client work involve communication, and if it were effective, accurate and timely, many claims and potential claims would be avoided. Problems, and potential claims, often arise because of lack of communication, misunderstandings and incorrect assumptions.

As an example, the timescales (and potential for unavoidable delay) involved in administering an executry estate are not necessarily appreciated by clients. Unless their expectations are managed at the outset and kept under review, executors or beneficiaries may have quite unrealistic expectations about how quickly an estate can be concluded.

Assumptions may arise on the part of solicitors too. For example, a solicitor acting in an unfair dismissal case must not assume that the client understands the significance of identifying the date of dismissal with absolute precision.

In relation to longer term critical dates (the deadline for exercising a break option in a commercial lease, for instance) is it the client or the solicitor who is taking responsibility for diarising the critical date? The client and the solicitor may both be clear about who is responsible for diarising but is their understanding the same? There is a real risk of incorrect assumptions being made with the result that the date isn’t diarised at all. This is one of those issues where communication should be clear, understood, acknowledged and in writing.

Claims also arise from allegations of a failure to advise. In such cases, unless the solicitor can reference contemporaneous file notes or written advice given to the client regarding the matter in question, it may be difficult to defend the claim.

The following client communications tips may provide useful guidance on minimising the risk of communication-related claims:

Take time at the initial meetings to explain any aspects of a transaction that a client may not otherwise appreciate or understand.

Keep a note on file of advice given to your client.

Take a precautionary approach: always advise clients of potential issues – even if they seem fairly obvious, and even with sophisticated commercial clients.

Provide regular updates – even where there is little or no progress on a file. A client is much less likely to be frustrated if you explain what you have done, and why things are not proceeding at the pace they had anticipated. It also enables clients to flag deadlines that you might not have been aware of.

Follow up calls and meetings with an email or letter summarising what was discussed and the outcomes of the discussion.

Inform clients in advance of a likely delay or likely increase in costs.

Scope the engagement clearly in your engagement letter – and update it as required if the scope changes.

We are in discussion about taking on a team from another firm. We wouldn’t be taking on responsibility for claims arising out of work done prior to joining us. Even so, are there any claims risk issues we ought to be considering?

There may be professional indemnity insurance implications and it really is never too early to speak to the team at Marsh, who will be pleased to explain the PII options and implications, in confidence.

Even where responsibility for claims arising out of prior acts/omissions is to remain with the other firm, there are risk issues worth considering. Ideally, you want to know as much about the past record of people joining your practice as practical and confidentiality considerations permit. That may inform decisions about recruiting them and it will also help inform the way you require to arrange supervision of your new colleagues and their integration into your business.

Lateral hires will have been accustomed to working to a different set of systems and procedures – and the more senior the colleague, the less inclined they may be to adapt to another firm’s procedures. Where you are bringing in an established team from another firm, perhaps based in a branch office, it can be hard to achieve integration into your culture, practices and disciplines.

Action points to consider include:

providing practical induction training on the firm’s systems, procedures and protocols;

evaluating additional training needs and ensuring these are delivered and assessed;

ensuring that adequate supervision is in place, even for senior recruits;

monitoring compliance with relevant procedures;

considering appointment of an informal mentor to assist and support recruits during the induction/transition period.

I am concerned about the risk of claims by lenders arising out of residential property/loan transactions. What can we as a firm do to minimise the risk?

The Master Policy Annual Report (downloadable from produced by Marsh provides an analysis of the most recent full year’s claims intimations for the profession. Lender claims – particularly those arising out of allegations of failure to comply with the reporting requirements of the CML Handbook – are referenced in the Annual Report.

Last year, the Society’s Conveyancing Committee produced a CML Compliance Checklist to act as an aide-mémoire for conveyancers – to prompt consideration of key CML reporting requirements. To download the checklist from the Marsh website, log in to and follow the links to Risk Management/Workshops & Seminars/Legal Risks Conference 2011.

Ensure that all relevant colleagues are fully aware of, and complying with, the reporting requirements. Satisfy yourselves that a consistent approach is being adopted by operating whatever supervision or signoff arrangements may be required to ensure this. Consider testing your colleagues’ approach to identification of facts/circumstances which may require to be reported to the lender.

Mortgage fraud manifests itself in a number of forms and there have been instances of identity theft where fraudsters have masqueraded as the owners of property, presented fake identification and borrowed substantial sums on security of the property. Whether solicitors who acted in these transactions are exposed to the risk of liability to lenders in the absence of any negligence or breach of contract is an issue subject to ongoing litigation.

Whatever the outcome, there is no doubt that awareness of the external frauds and scams to which the profession may be exposed is an essential aspect of risk management for solicitors. Read the guidance on mortgage fraud on the Society’s website. You can also download a simple AML risk evaluation template from our website. 

Calum MacLean and Marsh

Calum MacLean is a non-practising solicitor, formerly in private practice, who works in the FinPro (Financial and Professional Risks) National Practice at Marsh, global leader in insurance broking and risk management.

The information contained in this article provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisers regarding specific coverage issues.

Marsh Ltd is authorised and regulated by the Financial Services Authority for insurance mediation activities only.

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