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mium of the premium required for normal pro
fessional indemnity cover, approximately 15% in
most cases.
(b)
Legal Liability for the Torts or Breach of
Contract of employees
In the case of Lloyd v. Grace Smith and Co.,
1912 A.G. 716, a solicitor's managing clerk had
been allowed by the Solicitor to receive deeds and
carry through sales and conveyances. By misre
presenting their nature he persuaded a client to
sign documents the effect of which were to trans
fer property to him. He sold the property and
appropriated the proceeds. Throughout the Soli
citor was innocent and unaware of the clerks
activity. The House of Lords held that as the
fraud was committed in course of the clerks em
ployment the Solicitor was liable to the client,
even though the fraud had been committed solely
for the benefit of the clerk.
The normal policy carries this exclusion clause
"the Policy does not indemnify the insured in
respect of any claim against him brought about
or contributed
to by
the dishonest fraudulent
criminal or malicious act or omission of the in
sured, their predecessors in business or employees
of the insured or their predecessors in business".
This can be amended by deleting
the word
"employees". More desirable however is to have
the terms of the ploicy extended to cover ex
pressly claims
for damages made against
the
Solicitor due to the dishonest fraudulent criminal
or malicious conduct of employees.
(c)
Fidelity Guarantee
In addition the Solicitor may
insure against
direct pecuniary loss sustained by any act of fraud
or dishonesty committed by an employee. There
are various types of fidelity guarantee.
Cover under the headings (b) and (c) is avail
able on a percentage additional premium: the
normal percentage charged is approximately 20%.
(d)
Loss or Damage to Documents
For an additional premium of approximately
% the Solicitor may insure against legal liability
to any person in consequence of loss, damage or
destruction of documents, and the costs and re
storing such documents.
(e)
Change in Partnerships
Additional cover can be arranged to cover (a)
previous liability of a new partner, or (b) con
tinuing liability of a former partner. The premium
in each case is normally a 5% increase in the
premium payable. Where both are insured against
a premium of 7-J% is normally charged.
A point to bear in mind is that once a partner
retires he ceases to be covered by the policy as he
no longer comes within the definition of "the
insured". In the event of his continuing as a con
sultant it is possible that he may give advice or
information which subsequently turns out to be
incorrect and produces a claim against the in
sured and in these circumstances the insured or
the insurers have a right to recovery against the
consultant. In such circumstances an indorsement
on this policy should be procured extending it to
indemnify the insured in respect of claims made
against them due to a negligent act or omission
while the consultant is acting in that capacity to
the insured.
(g)
Breach of Warranty of Authority
It is also possible for the Solicitor to insure
against breach of warranty of authoity. In the
case of Mountstephan v. Lakeman an agent for
a local authority instructed a contractor to pro
ceed with construction work.
It subsequently
transpired that he was not authorised to do so.
As
the contractor had acted on his apparent
authority the agent was held liable for breach
of warranty of authority. An important point is
that in order to sustain an action for breach
of warranty of authority it is not necessary for
the plaintiff to show that the agent acted fraudu
lently or dishonestly; if a Solicitor warrants that
he has authority he will be liable if in fact lie did
not. Again cover
is
included for a percentage
additional premium.
These are the more important variations avail
able on the professional indemnity policy.
SCHEDULE E-TYPE
In the
Gazette
for July 1969
(Vol. 62, No. 2
Page 15) a decision of the Court of Appeal was
reported in which it had been held that a volun
tary car loan scheme whereby an employee was
given the loan of a car, taxed and insured, and
as a result an amount was substracted from his
wages, enabled the employee to have a car with
out its value being included in his salary for
the purposes of Schedule E. Unfortunately the
House of Lords in their decision reported in the
Times
on the 13th March over-ruled the Court
of Appeal.
(Heaton v. Bell,
The Times,
13th March
1969).
113