Refreshing risk quiz

2006 will inevitably present new challenges for practices in managing risks. However, the underlying causes of claims repeat and so it is worth considering what risk management improvements have been made by your practice over the course of the last 12 months. Improvements could have been as a result of a specific concern, a claim or complaint being made or – hopefully – simply as a result of considering the issues raised in these monthly Journal articles.

By examining how the issues raised in Journal articles have relevance to your practice, the basics for putting together risk improvements over the course of the year should be apparent. This month’s article provides a refresher on the risk management pointers which have been discussed. The questions posed refer to the content of the articles. To encourage practitioners to dig out their Journals (or view past editions online at www.journalonline.co.uk) and send in the answers (address at end of this article), there is a prize of a magnum of champagne on offer to the first correct set of answers drawn out of the hat.

JANUARY

The first article of last year provided a review of various risk management issues affecting practices in 2004, along with a look at some topics likely to present challenges in 2005. It noted that SDLT “continues to present practical challenges and to create risks for the profession”. Regrettably, it appears that delays and other deficiencies in the operation of the SDLT system continue to present additional risk challenges for solicitors.

Q1: In discussing the challenge of compiling a risk management manual, three key areas of risk were focused on. What were they?

FEBRUARY

The February article reviewed the risk issues faced by firms in relation to IT systems and policies, including action points on dealing with viruses; spam; frauds; unauthorised access; inappropriate use; and mobile technology. Practices must continue to be vigilant in order to protect the operation of what are now – for most solicitors – critical business tools.

Q2: From what date did the Master Policy cover for loss of documents become subject to a virus exclusion?

MARCH

“Raising the Game” dealt with the importance of risk management training by reference to a case study, showing how a practice might tackle risk management planning and training requirements in a logical way. The benefits of involving support staff in risk planning and training were highlighted along with the necessity of having a “risk-aware” culture.

Q3: The newly appointed risk management contact’s first steps in devising a risk management plan consisted of gathering information on claims, complaints and what else?

APRIL

This article dealt with the concept of benchmarking a practice’s performance, by reference to the case study firm featured in the March article. It explained why it can be simplistic to suggest that claims and complaints experience alone provides authoritative proof of the effectiveness of risk management. A claim arising today may result from work undertaken many years ago, since when the practice’s risk management procedures may have improved and its work profile and/or personnel may also have changed. The reverse may also be true – what was a good risk management system two years ago may now need review in light of changes in personnel or in response to known risks (e.g. SDLT delays).

The interaction between a poor claims record and Master Policy premium rating was also explained.

Q4: What is the maximum premium loading that can be imposed under the Society’s Master Policy discount and loading arrangements?

a) 100%?    b) 250%?    c) 275%?

MAY

Through a series of case studies, this article demonstrated the effects of simple oversights during the various stages of a conveyancing transaction. These types of omission regularly feature in the Master Policy claims experience and are typical of mistakes resulting from process errors rather than errors as to the law. The risk of “looking and reading” but not “seeing and understanding” appears to be a particular feature of the types of claim illustrated in the case studies.

Q5: Name one of the practical risk controls suggested as an aid to addressing the risk of oversight.

JUNE

Focusing on the theme of client engagement, the imminent commencement of the Client Communication Practice Rules was highlighted. Some of the critical risk management issues involved in engagement were discussed, by reference to a series of case studies.

The importance of properly identifying the client was addressed, including being clear about parties for whom you are not acting. The perils of not identifying the person authorised to give instructions were also illustrated by reference to a case study involving solicitors acting for owners in a building dispute. The lack of clarity about whether or not reports had to be made to factors or individual owners caused problems.

The potential consequences of failure to scope the engagement adequately were illustrated, as were difficulties in managing client expectations about timescales and outcomes. Other issues which might usefully feature in terms of engagement are identification of the responsible fee-earner, definition of the client’s responsibilities, an explanation of fees and the complaints process, and possibly limiting liability.

Q6: In relation to the company reorganisation case study, who intimated the claim against the solicitors? On what ground?

JULY

The risks associated with taking on directorships were discussed in “The Directing Mind”. Situations in which a potential conflict of interest might arise include fee generation by and re-appointment of the solicitor-director’s firm, and where specific legal advice is sought from the solicitor-director.

Risk management points include being aware of the potential for conflict; communicating properly with the board and contractually defining the relationships and payment for services. There are provisions of the Master Policy certificate of insurance (exception 13) which are particularly relevant to the operation of Master Policy cover for these activities. Three case studies demonstrated the application of these provisions.

Q7: In case study B, is any claim resulting from B’s legal advice likely to be covered by the Master Policy?

AUGUST

The article “Reality check – not Big Brother” gave pointers on what practices with good claims records ought to consider when reviewing the effectiveness of their risk management.

The article also featured a review of the essential elements of the Client Communication Practice Rules.

SEPTEMBER

In the run-up to the annual renewal of Master Policy cover, this article reviewed the relationship between risk management and Master Policy premiums by addressing some frequently asked questions. The following key issues were raised:

• the importance of having risk management systems which address the underlying causes of claims
• the necessity for all staff to understand those systems
• the requirement for those systems to be adhered to in practice
• the requirement for all staff to be risk aware.

Q9: The September article mentioned two aspects of risk management rated as being difficult by the profession. One was file review: what was the other?

OCTOBER

Looking at conveyancing issues, this article examined risk management techniques connected with avoiding and resolving boundary discrepancies and disputes. In addition to stressing the need for effective two-way communication with the client, it listed some practical steps that can be taken to head off a potential claim. The case studies provided illustrations of the things that can go wrong and concluded with some advice:

• Research – re-check descriptions and plans with clients
• Record – make proper notes of clients’ requirements and any amendments to original instruction
• Review – to ensure the transaction continues to deliver what the client requires
• Report – keep the client informed
• React – in the event of a problem, consider what can be done to rectify, perhaps involving insurers at an early stage.

Q10: The article mentions five ways in which the land registration system provides potential solutions to risk management problems. These include the P16 Report; the land certificate itself; section 9 rectification; and the Keeper’s indemnity. What is the fifth?

NOVEMBER

The November issue concentrated on risks that can arise as a result of failure to assess and manage adequately post-completion matters in transactions. The article listed 10 key questions to be addressed in relation to post-completion issues, as well as giving case study examples of the problems arising.

Q11: In the commercial lease case study, what deadline was missed?

DECEMBER

The concluding article of 2005 picked up on the tendering theme from an earlier issue of the Journal. The article considered terms and conditions which solicitors encounter with (commercial) clients in (draft) contracts for the provision of legal services and which potentially have professional indemnity insurance and risk management implications.

Q12: If a contract for the provision of legal services requires all disputes and claims to be determined by reference to binding arbitration, that potentially conflicts with the insurers’ conduct and control of claims under the Master Policy. True or false?

Hopefully 2006 will prove to be a profitable, claims-free year. During the course of the year, this column will be offering advice and suggestions on risk issues. At the end of the year, it will pose the question – what have you done to improve your risk management over the past year?

How will you answer?

Answers to the quiz questions should be sent by post to:

Charles Sandison, Marsh Ltd,

13 Bon Accord Square, Aberdeen AB11 6DJ

or by email to: charles.sandison@marsh.com

The draw will be made on 20 February 2006.

Charles Sandison is a consultant to the FinPro (Financial and Professional Risks) Practice at Marsh, the world’s leading risk and insurance services firm. To contact Charles, email: charles.sandison@marsh.com.

The information contained in this article provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisers regarding specific coverage issues.