146 / 196
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
148