How to escape the claims culture

With indemnity premiums set to rise, using the various guarantees available could be a way to avert negligence claims, predicts Brian Marson

In November last year, my company was invited to give a presentation to the Law Society's conveyancing and land law committee.The thrust of our message to the committee focused on the opportunities available for the profession generally to reduce exposure to negligence claims, and ultimately to reduce professional indemnity insurance costs.

We also explained how a Society practice rule 6 report on title could be replaced completely by a guarantee, and how, from a public relations point of view, all clients would benefit as well as the profession.Firms will generally be watching with some concern the warning signs emanating from professional indemnity insurers of substantial premium increases at renewal time later this year.

If the gossip on the street is to be believed, premiums could well double or rise by even more.

Generally, this is because when the Solicitors Indemnity Fund expired there was an underestimation of the total amount of claims that were being paid out on conveyancing matters.The profession may have enjoyed a short respite with lower premiums over the past two years, but pay-time is approaching.On the conveyancing front generally, the onset of changes to the processing system continue.

The Land Registry Bill successfully made its way through the House of Lords before Christmas, almost without amendment, which I was assured by one leading civil servant involved was an astounding first in that person's long experience.

The proposed legislation will mark the beginning of a profound effect on the conveyancing industry.

And we are still being assured that the Homes Bill will be reintroduced, possibly in the Queen's Speech in the autumn.Solicitors will understand the link between the opportunities explained to the land law committee in November and the way in which the conveyancing process is to change.

The exposure of the profession to negligence claims can be removed and replaced by forms of guarantee both in favour of the lender, which would ensure mortgage enforceability, and also in favour of the home buyer, to guarantee that he has good title.In the former situation, a rule 6 report on title would no longer be necessary and the advent of e-conveyancing would not face the unnecessary delays as currently exist, which are caused by panel law firms having to obtain clearance of conditions before exchange of contracts can be effected.

There would be no instructions and therefore no conditions to clarify.Indemnity premiums have been something of a nightmare for ten years or so as claims, and premiums, increased.Why cannot the profession remove its exposure to claims by encouraging the use of the guarantees that are available? In this way, both lender-client and buyer-client would know exactly their rights and would not have to prove negligence against a law firm.

In both cases, clients would be better served by this product.Claims made against insurance companies involved could be settled in weeks, not the years it takes for litigation to be completed in a negligence claim.

In due course, when the prepackaging programme for conveyancing changes is in place - driven in the short term by the concept of e-conveyancing, which the Society supports - then the double entry of conveyancing caused by the buyer's solicitors checking the seller's solicitors' work will also no longer be necessary, as the information itself would be guaranteed.There is an alternative to increased professional indemnity premiums.

It is no coincidence that the benefits to the profession by adopting this programme will also fit well with the conveyancing changes and will also benefit the profession's clients.This really is a case where change means everyone is a winner.Brian Marson is the chairman of First Title Insurance