News
Errors in residential property and re-mortgages were the most common source of professional negligence claims in the 2005–06 insurance year, according to professional indemnity insurer Zurich Professional.
For the sixth year running, the insurer says, such mistakes were the most frequent, accounting for 35% of all the claims and circumstances notified.
The most common problems were: inadequate investigation of title; failing to identify and deal with all the mortgages and other encumbrances affecting the property, failing to undertake appropriate searches and inquiries or failing to advise on the results; and failing to advise co-purchaser clients on co-ownership options.
Commercial property accounted for 11% of all notifications. Many of the mistakes made in residential property also cropped up, although failing to advise fully, accurately or at all on the terms of leases is also a common error, with solicitors failing to ensure clients understand issues such as rent reviews, the operation of break clauses and the extent of dilapidation liabilities.
Andrew Nickels, risk manager at Zurich, says his firm welcomes the new Solicitors’ Code of Conduct 2007 and particularly rule 5 which makes a commitment to risk management, a professional conduct requirement.
Nickels says: “The new Rule 5 imposes strict requirements on principals in firms to ensure that adequate supervisory systems are in place. Given the basic nature of the errors that give rise to most property related claims and the tendency of some firms to use unqualified people for parts of the process, it is to be hoped that a greater emphasis on supervision will lead to a reduction in claims against conveyancers.”
He says the new rule should hopefully lead to fewer negligence claims.
“If principals accept responsibility for the management of risk and error prevention is embedded in all of the internal systems and controls of every legal practice, then we should see a corresponding reduction in errors that lead to allegations of negligence.”
Errors in litigation made up 22% of all claims and circumstances notified, with most relating to missed time limits: missed limitation periods were the most common problem, followed by failing to effect service of the claim form in time.
Company/commercial claims make up only 4% of all notifications, but, Nickels says, this is often outweighed by the value of the claims that result. Common mistakes included: incorrect drafting of documentation; not checking wording or formulae; solicitors failing to identify their client or failing to identify conflicts of interest; and failing to define the scope and limits of the retainer.
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