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GAZETTE
APRIL 1 9 88
Report on the Professional
Indemni ty Scheme
by
Maurice R. Curran,
Chairman, Solicitors Mutual
Defence Fund Limited
At the November 1986 AGM of the
Society proposals were accepted
for the introduction of compulsory
indemnity cover and for the setting
up of a mutual scheme by the
Society. After discussions and
research both in Dublin and London
the Council of the Society in 1987
adopted the following proposals:
1. The precedent of the Medical
Defence Union Scheme be
followed through the estab-
lishment of a guarantee com-
pany to be cajled Solicitors
Mutual Defence Fund Limited
("the Fund").
2. The Scheme would provide
cover for £200,000 in respect of
eagh and every claim.
3. Top up cover above t he
£200 , 000 should be sought
from the insurance market.
4. Professional indemnity cover
should be left optional for the
time being.
Initially pro forma Proposal Forms
were completed by approximately
90% of practising members of the
Society. On the basis of these
forms Stop Loss cover in London
was negotiated to protect the Fund
against unexpected disaster in the
first year. An analysis of these
Proposal Forms by our Consultant
Actuaries led to the conclusion that
assuming the information in the
Proposal Forms was accurate, the
Scheme would be financially sound
and the proposed reinsurance and
bank facilities sufficient to ensure
the stability of the Fund.
Fresh Proposal Forms on the
basis of which the cover would
actually be granted were sought
from the Profession. These were
compared with the originals and
whilst there were obviously some
variations none were found that
were significant or that affected
the basic structure and funding of
the Scheme.
The Board of t he Scheme
decided on a premium of £1,000 in
respect of each solicitor for
£200,000 cover in respect of each
and every claim.
The Fund set itself a target of
2,000 participants in the first year.
At this stage it is a pleasure to
report that the Fund has 2,139 par-
ticipating members representing
1,039 firms. It is expected that a
further 47 solicitors representing
25 firms will have joined by 30th
April 1988.
The Board is very appreciative of
the level of support from members
of the Society, without which the
Fund could not have succeeded.
The members of the Profession will
appreciate (though perhaps not to
the same degree as the Board) the
commercial pressures that were
brought to bear by opposing com-
mercial interests which did not
wish Solicitors to join together to
indemnify themselves against pro-
fessional negligence claims.
One of the results of this outside
pressure was lack of belief in the
London Insurance Market that the
Fund would actually get off the
ground or, if it did, that it would be
successful. It is believed that this
is one of the reasons that the levels
of premium for Top Up cover were
not as satisfactory as the Board
would have wished. It is the
Board's view that the Market has
not recognised that what they are
being asked to insure is a situation
where each solicitor is carrying the
first £200 , 000 of each claim (that
is the Fund on behalf of the
member is carrying cover up to that
level) and all they are being asked
to do is to cover above that. On this
basis given that so far as is known
the highest paid claim in Ireland is
£150,000 there is certainly support
for our view that the Top Up
premiums should be considerably
reduced and it is hoped, with more
time available, to make this case
more effectively to the Market this
year. This is a matter that will be
given the highest priority. In this
connection it is important that all
members seeking quotations for
Top Up cover return the completed
Proposal Forms immediately. Of
course all members and new appli-
cants must complete a fresh Pro-
posal Form.
The decision of the Banks and
Building Societies during the year
to accept Certificates of Title from
Purchasers' Solicitors in connection
w i t h mo r t gage t r ansac t i ons,
provided t hat So l i c i t o rs had
indemnity cover, was certainly a
boost to the Fund and enabled us
to recruit a number of Solicitors
who might not otherwise have
taken out cover prior to compulsory
cover being introduced.
Although accurate statistics are
not yet available, it is believed that
about 90% of all Solicitors in
practice now have cover against
professional negligence which is
very encouraging and should
enable the profession to move
TYPE OF WORK FROM WHICH CLAIMS MOST FREQUENTLY ARISE
Conveyancing
Litigation Personal
Landlord
Injury
& Tenant
Commercial Trust &
Probate
Other
Categories
Matrimonial
Taxation
I
37.1%
12.7%
11.5%
10.8%
7.6%
5.7%
4.3%
1.9%
8.4%
67