ANNUAL SURVEY: mistakes in residential property and re-mortgaging continue to dominate


Law firms are being hit by the same negligence claims year after year because some fail to learn from past mistakes, an annual claims trends review by insurer Zurich has revealed.



Zurich has the biggest share of the professional indemnity insurance market in England and Wales, covering about 23% of the profession. Christine Bohner, head of Zurich Professional, told the Gazette she found the results 'baffling'.



'We see the same things happening over and over again, and these are basic mistakes,' she said. 'It is surprising... seven years after moving to the open market you would think people would be aware of the cost of claims.'



For the sixth year running, errors in residential property and re-mortgaging accounted for the majority (35%) of actual and potential claims against firms insured by Zurich in 2005/06.



The most common problems were inadequate investigation of title, failing to identify and deal with all re-mortgaging and other property issues, failing to undertake appropriate searches and enquiries, and failing to advise on the results.



Given that conveyancing and residential property probably constitutes the biggest share of the profession's work, Ms Bohner said she was not entirely surprised to see this area generate most problems. However, she pointed to the 'increased commoditisation' of conveyancing and residential property work as a cause of driving prices down and consequently contributing to the relatively high number of claims.



She said: 'So many people are buying and selling. Firms have had to find ways to keep prices low, to do the work quickly and to cut corners to compete. We completely understand that firms, small firms in particular, need to bring business in and remain competitive. But if corners are cut and mistakes are made, it is not to the firm's benefit because they will have to pay for resulting claims.'



Errors in litigation came second in Zurich's table, accounting for 22% of all claims, the vast majority of which related to missed time limits.



Commercial property accounted for 11% of all notifications, while company/commercial claims made up just 4% of claims or potential claims. However, the high value of claims against City firms far outweighed their infrequency in terms of cost.



Ms Bohner welcomed rule 5 of the new Solicitors Code of Conduct as effectively 'forcing firms to put procedures in place to help them stop making mistakes'. She suggested solicitors contact their insurer now to ensure they comply with new risk management regulation.



A Solicitors Regulation Authority spokeswoman said: 'The requirement of rule 5, including arrangements for risk management, will help firms to address those areas of their operations which sometimes get overlooked to the potential detriment of clients. In this way, the new rule should raise management standards and benefit everyone.'



l To receive the Gazette's special professional indemnity supplement, out this week, email: marketing@lawsociety.org.uk



Anita Rice