Risk management

Insurance and conditional fees Nearly half of all solicitors are not advising clients of after-the-event insurance against the cost of losing an action, a recent survey has revealed.

The rules governing professional conduct require solicitors to raise this with their clients, and failure to do so could result in an action for negligence.

You must advise as to the availability of such insurance, and ensure that a policy is appropriate to your client's needs.

Remember, however, that you are not obliged to act as a broker - it is not your duty to find the best deal for a client.

Use your retainer letter to ensure that clients understand their obligations - they must keep you informed of any developments, give you instructions, and attend any appointments with experts.

Ensure also that they have understood the potential liabilities - if they win, if they lose, or if the action comes to an end in some other way, and that they may have to pay some costs even if their claims succeed.

Do not rely on the client's signature on an agreement to prove that the contents were explained to him or her.

Best practice is to explain these matters in an interview, make a full attendance note and then confirm them to the client in writing.

Remind the client of the position at intervals throughout the case.

Do not forget that if you are to recover your success fee and any insurance premium, then under r.44.15 and the relevant practice directions you must give notice of the arrangement to the court and the other party in the prescribed form.

Finally, remember that a conditional fee agreement creates a relationship between your firm and the insurers.

You must inform them of any developments.

Take the case of a solicitor instructed to bring a personal injury claim.

He did not inform the after-the-event insurer as to the contents of the defence, but merely expressed the view that the case still had more than a 50% chance of success.

The claimant did not succeed at trial.

The insurers took the view that the contents of the defence were highly relevant to the prospects of success, and that the solicitor had failed to inform them of a material fact; they refused to make payment under the terms of the policy, and the solicitor was left to pay the costs of both parties.

l For further information on claims prevention, contact the risk management team at St Paul International, tel: 020 7645 6920.