Posts Tagged ‘professional indemnity’

Legal bodies step in to fight landmark professional indemnity case

Wednesday, January 25th, 2012

The Law Society and the Solicitors’ Regulation Authority (SRA) have been given permission to intervene in Godiva Mortgage Limited v Travelers Insurance Company Limited. The issue is the extent to which insurers’ liability to cover multiple claims against a solicitors’ practice may be limited by aggregating them as one claim.

The current position which appears to allow large numbers of claims to be aggregated was arrived at after a decision by the SRA to shift the goal posts in favour of the insurers by altering the aggregation clause in the Minimum Terms and Conditions in 2005. It is now obviously felt that the Insured solicitors, their clients (and in cases of dishonesty, the Solicitors’ Compensation Fund) are insufficiently protected.

Further clarity on the wording is needed to allow underwriters to assess accurately the risks and fix premiums. This may result in solicitors (and other professionals) insisting on certain wordings in their primary policies, driven in all likelihood by their clients, especially mortgage lenders.

Posted by Jim Hobsley, who specialises in professional indemnity claims involving a wide range of professionals including accountants, surveyors, solicitors and barristers; experienced in policy coverage disputes.

Jim Hobsley

Jim Hobsley
0207 337 1011
jhobsley@brownejacobson.com

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Reasonable reward for reasonable risk

Friday, November 25th, 2011

The case of Fortune v Roe has re-visited the question of success fees and what the correct success fee ought to be if certain risks are removed from the litigation.

In this case the Claimant had been involved in a very serious car accident but by the time she entered into a CFA liability had been admitted and judgment entered for damages to be assessed. The CFA provided for a success fee of 100%. Sir Robert Nelson found that there was no risk to the recovery of charges to the solicitor and there could not be said to be a litigation risk. Therefore the only risk was of receiving no costs after beating a Part 36 offer and the success fee would represent compensation for that. As a result the court found that a success fee of 100% could not be justified and the figure of 20%, awarded by the first instance judge was upheld.

This shows the importance of getting the risk assessment on the CFA right. If it’s not an accurate assessment then we can expect the courts to get involved – with cost consequences!

Posted by Nichola Evans, who specialises in professional indemnity work, directors and officers, legal expenses insurance, conditional fee agreements and after the event insurance and commercial litigation.

Nichola Evans

Nichola Evans
020 7337 1019
nevans@brownejacobson.com

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Damages awarded for negligent valuation

Friday, September 16th, 2011

The Commercial Court last week in Capita AFS (Guernsey) Ltd v Drivers Jonas ruled against the defendant firm of valuers, awarding damages of £18.05m.

Drivers Jonas were found to have negligently over-stated the commercial prospects and value of a factory outlet shopping centre in Kent.

One of the salutary warnings to emerge from the decision is that professionals are likely to be in breach of duty if they take on jobs beyond their capability or experience. In this case, the Judge gave very short shrift to the valuers’ protests that (1) the client knew all about the defendants’ lack of expertise in any event and (2) there was scope to acquire the necessary experience ‘on the job’.

What the valuers should have done – at the outset – was decline to act (or at least advise that the necessary expertise be commissioned from elsewhere!)

Drivers Jonas’ PI insurers are understood to be looking at an appeal in this matter.

Posted by Nik Carle, who specialises in professional negligence and insurance coverage disputes; deals with claims against advisers in the IT, legal, property, media and financial services’ sector.

Nik Carle

Nik Carle
0115 976 6143
ncarle@brownejacobson.com

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CJC working party to progress civil litigation reforms

Friday, August 5th, 2011

The Civil Justice Council are to put together a working party to develop practical proposals on the back of the Government’s plans following Lord Justice Jackson’s review of civil litigation costs.

The working party will look at implementing secondary legislation, focusing on qualified one way cost shifting, the introduction of additional sanctions and rewards under Part 36 as well as the detail of the proportionality test and when the test should not be applied.

Crucially, the party will not be considering the government’s original policy objectives but focusing instead on the practicalities of introducing these measures.

The working party are expected to complete papers on these proposals by the end of September this year.

Insurers will be interested to note that representatives from key civil law areas affected by the proposals will be invited by the CJC to attend and provide feedback at a workshop expected to take place in October.

Posted by Nichola Evans, who specialises in professional indemnity work, directors and officers, legal expenses insurance, conditional fee agreements and after the event insurance and commercial litigation.

Nichola Evans

Nichola Evans
020 7337 1019
nevans@brownejacobson.com

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Valuers breathe a sigh of relief

Friday, June 17th, 2011

The much anticipated decision in the case of Scullion v Bank of Scotland t/as Colleys was handed down this morning by the Court of Appeal.

In overturning the first instance decision, it was held that the valuer of a residential property does not owe a duty of care to a borrower if he was instructed by a commercial lender and the borrower is a buy-to-let investor. In reaching this decision, the Court of Appeal has ruled that there is a distinction between ‘standard’ purchasers (to whom a duty is owed, even if the valuer was instructed by the lender) and buy-to-let investors.

This decision will be welcomed by valuers and their insurers, who will have been concerned by the first instance decision, which sought to widen the scope of the principle in Smith v Bush, increasing claim numbers in a sector that has already been badly hit by the downturn in the housing market.

Posted by Tim Johnson, who specialises in professional indemnity claims; defending professionals in the property, legal, financial services and IT sectors; also advises in relation to insurance coverage disputes.

Tim Johnson

Tim Johnson
0115 976 6557
tjohnson@brownejacobson.com

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Limit of Financial Ombudsman Service jurisdiction to be increased to £150,000

Tuesday, May 31st, 2011

The Financial Ombudsman Service’s maximum binding award will be increased to £150,000 from the current limit of £100,000.

The change will come into force on 1 January 2012 and will only apply to complaints referred to FOS on or after 1 January 2012.

How a decision – which will soon mean a binding award of up to £150,000 – can be said to be “fair and reasonable” when a court of law could not reach the same outcome remains a sore point for those in the firing line.

And that is before one considers that, in so far as time limits are concerned, there is no 15 year long-stop date, in the same way that non-regulated firms are protected from stale claims by the Limitation Act 1980.

Other pressures abound – for example, the likely increase in professional indemnity insurance premiums and the drain on capital caused by the ever increasing FSCS levies.

Whilst giving consumers confidence in dealing with an FSA regulated firm is laudable, it is very easy to see why many IFA and broker businesses are under severe pressure.

We are likely to see more attempts to judicially review its decisions. It will be interesting to see if the courts will be able to find a way through the FOS’s very wide statutory authority.

Posted by Jonathan Newbold, who specialises in professional negligence, financial services and commercial dispute resolution; advises insurers on policy wording and coverage matters.

Jonathan Newbold

Jonathan Newbold
0115 976 6581
jnewbold@brownejacobson.com

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FOS compensation clarity

Friday, November 5th, 2010

Claimants who accept a Financial Ombudsman Service (FOS) final determination will be bound by it and will not be able to then bring a civil claim through the courts against their financial adviser for any loss above the £100,000 limit to the FOS’ jurisdiction following a recent High Court decision.

The decision in Andrews v SBJ Benefit Consultants is very good news for IFAs and their professional indemnity insurers because it has clarified that claimants cannot accept a FOS award and then issue proceedings for the balance of any loss.
Of course there remains a risk that complainants might secure a favourable FOS determination, reject it and press on with civil proceedings.

However, most IFAs and their insurers would be happy with that because claims dealt with by the Courts are assessed in accordance with the law rather than what is “fair and reasonable” in the Ombudsman’s opinion, which some believe leads to decisions that are “consumer-friendly”. The judgment certainly brings much needed clarification to a long standing area of uncertainty.

Posted by Jonathan Newbold, who specialises in professional negligence, financial services and commercial dispute resolution; advises insurers on policy wording and coverage matters.

Jonathan Newbold

Jonathan Newbold
0115 976 6581
jnewbold@brownejacobson.com

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