Solicitors are being forced to double their minimum indemnity insurance cover as Britain becomes a more litigious society.
For more than ten years solicitors have been required to take out minimum cover of £1 million. From this year the sum will rise to £2 million.
According to Angus Turner, a partner in the insurance team at Birmingham law firm Mills & Reeve, the increase is designed to combat the rising tide of claims against solicitors, and the increase in awards made.
But he added: "In reality, this will affect very few firms as most will already have cover way in excess of the minimum."
All solicitors firms are required to renew their indemnity cover from October
1. Those that don't are forced into the Assigned Risks Pool administered by the Law Society. This ensures continuing protection for those who use uninsured firms, but is an expensive alternative for those firms who fail to arrange their own cover.
But even those with their house in order face premium hikes, with some brokers predicting inflation-busting rises. Over the next few weeks firms will discover from their brokers what the damage is.
An increase in claims, particularly in the areas of personal injury, property matters and matrimonial cases, along with an increasingly litigious society, may all contribute to an increase in premiums. However, firms should also remember that any premium change could also be down to their own success over the last 12 months, as an increase in turnover will in all likelihood affect the level of premium payable.
Mr Turner, whose team in currently handling more than £75 million of claims against professional firms, says professional indemnity insurance continues to be a major overhead, and advises firms to undertake regular risk assessments to ensure their premiums are at least kept at a realistic level.
"All firms need to get ensure they have a risk management culture embedded in their people," he said.
"Getting the basics right, such as ensuring their retainer letters define the scope of their service, and updating them when the instruction changes, producing full file notes and confirming key instructions in writing, will assist claims avoidance.
"Similarly, ensuring staff are properly supervised is fundamental. This doesn't just apply to junior staff, but to senior staff responsible for making decisions which could expose the firm.
"In these instances, a second or even third opinion from colleagues should become the norm.
"File management is also becoming an increasing concern, particularly with the rise of electronic mailing. Firms need to ensure that electronic communications are properly stored and accessible for evidence.
"Finally, firms need to make sure their notification procedures are in order - failing to notify insurers of an impending or likely claim could result in their insurers maintaining that prejudice has been caused, resulting in firms having to foot part of the damages award.
"Also firms should be aware of the successor practice rules which are complicated at best. If a firm merges with another firm, or takes on partners from another firm, the acquiring firm may be deemed to be a successor practice, in which case it will take on responsibility for claims arising from the prior conduct of those other firms. Therefore, greater focus should be applied to due diligence than might otherwise have been the case."
Since September 2000 law firms have been able to buy indemnity cover on the open market. Previously they had to take out the minimum level of indemnity cover with the Solicitors' Indemnity Fund.
"There are a number of insurance companies who specialise in professional indemnity cover for the legal profession. Brokers will advise firms on which insurer is the best fit for them, and it is unlikely that cost will be the priority for most, with level of service perhaps being the key issue," Mr Turner suggested.
Mills & Reeve has offices in Birmingham, Cambridge, London and Norwich.