Law firms are showing a growing interest in insuring themselves against 'Armageddon' type claims, a broker revealed this week.


Steve Holland, divisional director at Alexander Forbes Professions, said solicitors were concerned that limited liability partnership (LLP) status would not protect them from a multi-million pound liability claim.



A snapshot survey of 37 firms conducted by the broker revealed that 41% thought an extra layer of insurance was needed to enable them to defend a negligent partner or re-launch the firm if its existence were threatened.



Mr Holland said an increase in the number of claims in recent years meant there was increasing demand for catastrophic cover. He said: 'Although solicitors have limited liability protection through the LLP, there is a possibility that the claim goes through the limit of indemnity, making the firm become insolvent and implode.



'There are a lot of firms that have got some very big exposures and which are already buying considerably more than the minimum cover. I get calls on a weekly basis from firms saying they have got a large contract above their cover limit and they would like to try to buy an extra layer. There is £250 to £300 million worth of capacity out there for firms to buy cover.'



Mr Holland added that there had been considerable interest in a new policy launched by ACE European Markets that provides protection against catastrophic claims and provides funds for partners to create a new business.



Nick Pointon, director of broker PYV, added: 'Firms are certainly wanting extra layers of cover for certain deals, although they have to buy this for the next six years. However, I would advise firms to buy as much cover as they can afford - and sleep easier - because it is relatively inexpensive at the moment.'



Rachel Rothwell