The Gazette 1971

objection is seen to the principle of a lwyer avoiding liability by agreement or disclaimer, and. on the other hand, that it is unheard of and would not be approved. The need of a lawyer for protection against loss through an action for negligence brought against him by a client must be related to the area of practice in which it arises. Having regard to the basis of the law- yer's liability for negligence—the failure to exercise reasonable care and skill—one would not expect a lawyer to seek exoneration from that obligation in respect of any work done in his regular field of practice, which does not involve novel or doubtful questions of law. The difficulty is to know when he is being led into terra incognita and so rendered more vulnerable to the risk of error. Specialisation reduces the risk, but the specialist, known as such, might be regarded as owing a higher duty of care to his client because he impliedly professes a greater knowledge of the law in the parti- cular field of his specialisation. In most cases of profes- sional negligence against lawyers the cause of action arises without the lawyer's knowledge of his negligence having occurred, or even that there was any particular likelihood of it occurring. Only a general form of agree- ment would have saved him. Perhaps a written retainer, taken as a matter of course from all clients, with the exemption clause in small print, would meet the case. Whether small print were used or not, one can imagine, in some countries, the righteous indignation of a judge before whom such an agreement was pleaded as a defence to an action by the client against the lawyer for negligence. There will be considerable agreement with the view expressed by Mr. J. Fontana (Federal Bar Association U.S.A.). I do not believe that, with respect to actionable negli- gence, an indemnity by the client, exonerating the lawyer from the liability for his negligence in acting for the client would be acceptable. The lawyer's duty is to handle his client's affairs with reasonableness and diligence. If he is negligent in not doing so, he should be held liable for his actions. General Agreement to Practise with Limitation of Liability Apart from the ethical question, general agreement by members of the profession in a particular place to practise with limitation of liability to their clients would be a practical prerequisite to the success of the method, since there would always be lawyers (i) to whom the idea of offering their clients less than a reasonable standard of skill and competence would lie repugnant, or (ii) whose confidence in their own skill and compe- tence would brook no such negation of it, or (iii) who would use their acceptance of liability as a means of gaining clients from those who disclaimed liability. Special agreements might be considered by lawyers to protect them against the risks inherent in (a) very large transactions taking them out of their insurance depth and involving obviously difficult or uncertain question of law, (b) matters raising novel or doubtful questions even without the element of magnitude, (c) matters in which they acknowledge a lack of experience but act because of the client's insistence. Lawyer not Necessarily Liable for Mistake The competent lawyer's awareness of the particular risks of error under (a) and (b) would indicate that he

would not necessarily be liable to his client for the consequences of a mistake or for having followed a course of conduct later proved to have been wrong. This theoretical exemption from liability would give him small comfort if he were forced to contest the issue in Court and possibly have it decided against him by an unsympathetic jury. A barrister, having no contractual relationship with his client, and being now concerned in the matter of his professional negligence only with the Hedley Byrne principle, would have little difficulty in securing him- self against claims for negligence in respect of some "paper work", by a unliateral disclaimer in general terms, related to the doubtful state of the law on which his opinion is given. However, when called upon to advise on a course of action, one way or another, he would possibly need his client's agreement in order to avoid liability, if his advice were held to have been given negligently—i.e. without exercising the care and skill which should be possessed by a barrister of reason- able competence. A barrister who became known for his practice of disclaiming responsibility for his opinions would hardly be the first choice of a solicitor seeking positive direction in his client's cause. The conclusion to be drawn from the discussion of this division of the topic is that avoidance of liability by agreement or disclaimer is not a practicable method of resolving the lawyer's difficulties in the matter of professional negligence. PART III : POSSIBLE INSURANCE COVER Division 1—The nature of Professional Indemnity Insurance According to many correspondents, it is of an ill nature. Most insurance contracts are hedged about with conditions unpalatable to the insured, and professional negligence insurance for the lawyer is no exception. It is a form of liability insurance "in which the event insured against affects the assured in relation to his financial resources by reason of his becoming liable to pay to a third party either damages for breach of con- tract or tort, or some other form of compensation, restitution or reimbrusement". 19 Of comparatively recent origin, having been devel- oped during the nineteenth century, liability insurance was, nevertheless, very rapidly fitted into the great body of insurance law which had grown around marine insurance to establish the nature of an insurance con- tract. The basic principle of this form of insurance, as with most others, was the contract of indemnity, under which the liability of the insurer is limited to the amount of loss proved to have been suffered by the insured. The requirement of uberrima fides applies to this type of insurance, imposing obligations to disclose all material facts and to avoid any misrepresentation of a material fact, however honestly made. The conse- quence of any breach of these obligations is that the insurer becomes entitled to repudiate the contract. In general, a policy of professional negligence insur- ance indemnifies the holder against loss through claims made against him in respect of his professional negli- gence during the year of insurance covered by the policy, within stated limits of amount. It is completed on a proposal by the person seeking insurance on a form which is probably a standard form in all countries where this type of insurance is written. An example of a standard form of proposal is given in the appendix. The standard "extensions" available to an insurer appear in the proposal. 147