The Gazette 1979

GAZETTE

In conclusion, it must be said that at a time when the

Solicitors' monopoly in conveyancing matters is under

critical examination it would seem shortsighted for the

profession to allow another area of legal expertise to pass

JULY-AUGUST

1979

from its ken, and perhaps into the hands of persons, not

all of whom would have had any adequate training for

undertaking such important work.

Dublin Solicitors' Bar Association

COMPULSORY PROFESSIONAL INDEMNITY INSURANCE IN

IRELAND

On 14th March, 1979, Mr. Kenneth Pritchard, Secre-

tary of the Law Society of Scotland, spoke to members of

the Association on the origins and working of the scheme

of compulsory

professional indemnity

insurance

introduced in Scotland in 1976.

Introducing Mr. Pritchard, Mr. John Buckley,

President of the Association, reminded the audience that

they were listening to Mr. Pritchard in the context of the

prevailing Irish situation in which only 50% of the

Solicitors profession was covered by any form of pro-

fessional indemnity insurance and in the likelihood of

future legislation which might in due course require

all

Solicitors to be insured against professional negligence.

The Incorporated Law Society has done a great deal to

protect the public through its own compensation fund but

it remains desirable that the entire profession should be

covered by proper insurance.

Mr. Pritchard, in describing the Scottish Scheme, was

careful to emphasise that while the Scheme seemed

eminently suitable in Scotland, it might not necessarily

suit Irish circumstances, or even conditions in various

other parts of the U.K.

During the early 1970's, experience in Scotland

showed that, while many firms were covered by pro-

fessional indemnity insurance, and had been covered for

many years, many firms either were insufficiently covered

or were finding it impossible to obtain insurance cover at

any price. This, it was felt, was not based on the loss

record of Scottish Lawyers, but on the national

experience over the whole U.K., and Scottish Lawyers

felt they were being penalised unfairly for the short-

comings of Lawyers elsewhere.

In this context, the Scottish Law Society decided to

consider whether it might itself negotiate a scheme where-

by all Scottish Solicitors could be covered, motivated in

part by the belief that, if compulsory professional

indemnity insurance was to be introduced, then it would

be preferable that such insurance should be introduced by

lawyers themselves, in the most suitable form and on the

best possible terms, rather than have some scheme

imposed upon the profession which might not, in fact, be

the best that could be arranged.

As it would be necessary to have special legislation

passed to enable the Law Society to introduce its own

compulsory scheme, it was decided initially to negotiate

terms with a leading insurance company whereby

all

Scottish Solicitors who sought it could be guaranteed

cover, but at premiums negotiated individually with each

firm or sole practitioner. This "voluntary" scheme was

introduced in 1974, at premiums which seemed accept-

able, but in 1976 the insurers notified the profession that

all premiums would be increased by 400%!

After much argument, a reduced increase of only

350% was negotiated with the Company concerned.

During the negotiations on this premium increase, it

was established that during the period of the "voluntary"

scheme, the insurers had collected £300,000 in premiums

and had paid out only £21,000 in claims. Not

withstanding these figures, the Company insisted that it

must establish a very considerable insurance fund to

underwrite the scheme and this was its justification for the

large increase in premiums.

At this stage (1976) the Scottish Law Society's parallel

endeavours are successful in procuring the passing of the

Solicitor's (Scotland) Act, 1976, which included radical

provisions enabling the Council of the Law Society to

introduce compulsory insurance and to make all or any

enabling Rules, as and when necessary.

Almost simultaneously Mr. Harold Wilson, the then

Prime Minister, established a Royal Commission to

investigate the Solicitors' profession in Scotland. The

Royal Commission has not yet reported, but it may well

attack Solicitors' monopolies and may also recommend

compulsory insurance.

The Scottish Law Society decided to move while it had

a free hand and, in accordance with the provisions of the

Act, it sought advice from three independent firms of

Insurance Brokers and from the profession itself.

The alternative concepts permitted by the Act were:-

(i) A Mutual Fund;

(ii) Individual "approved" insurances, negotiated

individually, but within requirements to be laid

down by the Law Society;

(iii) A Master Policy for the profession as a whole, to

which all would contribute.

It was ultimately decided, and with a remarkable

similarity of advice from all three Brokers, that the third