The Gazette 1971

Division 2—Insurance Cover for the Lawyer Many lawyers practising in countries where this form of insurance is most common will remember the time when it was hardly known in their profession. They will remember the small premiums they were charged for their own policies in the earlier years of their insurance and the rude shock they suffered some ten years ago when premiums were suddenly increased by 100 per cent or more; and the amazement with which they received the insurer's reply to their enquiry as to the reason for such an increase : that premium rates are calculated on the experience of insurers in professional indemnity insurance of all professions in all parts of the world. Notwithstanding the greatly increased premium rates, the percentage of lawyers becoming insured has steadily increased, partly because of a growing awareness of the lurking danger of actionable error and partly because of the consciousness of their professional bodies that negli- gence insurance for all members of the profession is most desirable. Barristers had little to fear in the way of negligence actions before the decision in Hedley Byrne v Heller and were mostly uninsured. Reports received show very considerable differences in the percentages of barristers insured—e.g., in England 90 per cent insured; and Ireland 90 per cent uninsured, in Scotland 60 per cent not insured. Where the professions are fused there is generally a wide acceptance of insurance as a necessary incident of practice. Notable exceptions are Iran and the U.A.R. In those countries lawyers do not carry professional negligence insurance. The following extracts from cor- respondents' replies show some of the variations from country to country, as well as points of similarity : South Africa : For a considerable number of years attorneys have been carrying insurance against claims by clients for damages arising out of the negligence of the attorney. The premiums charged by the insur- ance companies showed alarming increases year by year and on enquiry we were informed that the loss experienced by the insurance companies was not con- fined to the question of loss incurred by the com- panies only through the negligence of attorneys, but that the premium rates were calculated according to the loss experience of the companies for all profes- sions. As a result of grave dissatisfaction at the rise in premium rates, the Association of Law Societies of South Africa, made arrangements with one purely South African company to offer a policy to attorneys providing for indemnity against claims by clients for damages arising out of negligence at a fairly reason- able tariff rate. The company undertook not to increase premiums without prior negotiation with the Assocation of Law Societies. U.S.A. : Policies of professional indemnity insur- ance are available to lawyers in the United States. Generally they may be obtained in any amount the practitioner is likely to desire. These policies indem- nify a lawyer against claims based on negligence, malpractice, or liability based on any other theory of failure to meet professional responsibility. As with all insurance, the insurer may raise its rates from time to time or refuse to renew a lawyer's policy if too many claims are made under it. In a recent Wall Street Journal article, it was esti- mated that 95 per cent of practising lawyers carry malpractice insurance coverage today as against only 5 per cent some ten or fifteen years ago. Premium costs have increased by an average of 36 per cent

over last year. One of about six companies that write such insurance require the lawyer to pay at least the first £5,000 of any liability. In New York one full coverage policy that pays up to $100,000 on each claim (subject to a ceiling of $300,000 per policy holder per year) in 1969 costs $202 a year—almost double the 1968 rate. England : The policy commonly offered by under- writers in England and Wales affords indemnity to the solicitor, or to the combination of solicitors form- ing a partnership, against their legal liability to pay damages for breach of duty as solicitors. The policy will also afford indemnity for plaintiff's costs (sub- ject to the limit of indemnity under the policy not being exceeded). Furthermore, there is normally a provision for defence costs incurred with under- writers' consent to be paid in addition. The indemnity afforded by this type of policy can normally be arranged according to the estimated requirements of the solicitor. It is the fact that many professional persons are today inadequately insured and quite a number still do not insure at all. This is in most cases their own responsibility in that for reasons of cost or otherwise they have not sought adequate cover. It is sometimes not realised that the indemnity applies to the aggregate of all claims made on the policy during the year, so that unless the cover is really adequate there is a risk of the policy being exhausted and leaving the solicitor without cover if he has a very large claim, or more than one claim of lesser size. Germany : The indemnity provided is adequate. The costs are reasonable. The percentage of lawyers not insured is approximately less than 3 per cent. New Brunswick, Canada: The cost is unreason- ably high. About 25 per cent uninsured. Switzerland : The tariffs have to be approved by a Government Supervisory Body. Information from various companies shows that between 10 per cent and 25 per cent of lawyers might not have concluded a professional liability insurance. The action taken by the Law Societies of South Africa, as above reported, is not described in sufficient detail to identify the basis of the arrangement made with the insurance company. Other professional associations of lawyers have sought to assist their members by nego- tiating special arrangements with insurers. The General Council of the Bar of Ireland recently arranged a form of group insurance for members, but it is noted by Mr. McMahon that experience in the working of the group policy is still wanting. Probably the number of mem- bers of the Irish Bar (about 250) is too small to give any reliable gu ; de on group insurance. In England, barristers normally combine in "sets of chambers" as a group to obtain a policy for the members, usually numbering between seven and twenty. The cost to each member is less than an individual insurance for a member would cost him. In Austria, group insurance is not considered, "as it is legally forbidden to grant lower premiums to such a group". The Law Society of New South Wales, as the profes- sional association of the solicitors of that state, has for some years past been concerned with the problem of professional negligence insurance for its members. I include as an appendix to this paper a report prepared by Mr. J. N. Creer, Chairman of the Special Committee appointed by the Council of the Society to enquire into possible schemes of group insurance and to negotiate terms with underwriters. More recently, the Law Society

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