Excelling with Lexcel

What are the risk management benefits of the Lexcel practice management standard? The answer is twofold.

The majority of successful claims against solicitors are for failures in the management of work and procedures rather than a lack of legal knowledge.

Even where lack of knowledge is identified as the cause of negligence, this can often still be interpreted as a management failure.

For example, successful claims can arise when a solicitor strays outside an area of expertise.

This could be avoided by a more rigorous embargo within the firm on dabbling in unfamiliar territory, and by a good supervision and reporting of claims policy that spots the problem before it reaches the stage of a negligence claim.

Lexcel sets the standard for good practice in solicitors' firms and provides a platform from which to develop sound procedures covering the internal management of the firm and management of client relations.

Whether or not firms decide to adopt Lexcel, many insurers are using these management standards to assess the risk profile of their clients.

Insurers have the comfort of knowing that a firm that has adopted Lexcel has been independently assessed and will be continuously audited internally, by the law firm itself, and externally by independent assessors.

The second reason insurers are interested in Lexcel, is that the Lexcel standards explicitly require firms firstly to appoint a risk manager and, secondly, to assess the risk of the work the firm carries out.

No insurer expects solicitors to work in a no-risk environment, but they do expect them to have an awareness of the high-risk areas of their work and the steps that need to be taken to avoid claims.

The risk management policies in Lexcel require firms to look beyond the avoidance of claims on a case-by-case basis.

As part of this, firms must review data collected about claims so they can draw a picture of the firm's own weaknesses and then set in place initiatives to overcome such problems.

Insurers are more impressed by businesses which operate systems of self-scrutiny and can pre-empt claims than those that start to put their house in order after disaster has struck.

As a result of this, insurers are increasingly looking to see whether firms have adopted Lexcel.

There is no guarantee that being Lexcel accredited will result in an immediate reduction in premiums.

However, since professional indemnity insurance is likely to be one of a firm's largest overheads, a firm that has Lexcel and has maintained it for a number of years is likely to have a better claims record.

As a result, such a practice will gain premium advantages over firms that have lagged behind.

This column was prepared by AFP Consulting, a division of Alexander Forbes Risk Services