Risk managementWho is your client?Martin, a dealer in electrical equipment, came to see John, a solicitor, three years ago after receiving a county court summons from Keith, a purchaser claiming to have been sold defective goods.Martin said his costs would be covered by Kwik-Klaim, a legal expenses insurer.

But the insurers would not confirm cover until they had finished investigating the claim.

In the meantime, John obtained a payment on account of costs from Martin and carried on defending the action on his behalf.Reviewing the papers, John decided that Martin might have to refund some of the purchase price, but that a substantial part of the claim was ill-founded and would be thrown out by a judge.

With this in mind he wrote to Martin, recommending a payment into court of 10,000 to protect his position as to costs.John heard nothing back and let it lie.

Six months later, he received a letter from the legal expenses insurer agreeing to provide cover.

He then prepared a full report on liability and quantum, and sent it to Martin and to Kwik-Klaim.

Again he recommended a payment in.

Kwik-Klaim wrote to ask why the payment had not been made earlier, but John still received no instructions from Martin, so again he took no action.The claim went to trial and the purchaser won.

The trial judge awarded him 7,500.

As there was no money in court, Kwik-Klaim had to pay Martin's costs, a substantial part of which could have been recovered from Keith if the payment in had been made.Kwik-Klaim did not give up there.

The company launched a claim against John, saying he had failed to provide adequate advice to Martin and to themselves.

The claim was reported to the Solicitors Indemnity Fund and was finally settled with a payment to the insurer representing part of the costs.John's mistake was not to take account of his co-existing duties to Martin and Kwik-Klaim.

He should have made it clear to Martin that if he did not make the payment in, Kwik-Klaim could avoid the policy.

In view of the tight timetable governing Part 36 Offers, it is imperative that practitioners identify all their clients and the respective duties owed to them.

In this case, John had not considered Kwik-Klaim's right to withdraw indemnity.

Had he thought about the interests of both of his clients at the outset, he could have avoided a negligence claim.X For information on claims prevention, contact your claims handler at the Solicitors Indemnity Fund or the Risk Improvement Unit; tel: 020 7566 6000.