Where there's a will

Although there has been a increase in claims arising from wills, trust and executry work over the past five years, such claims, both in frequency and severity, comprise a small part of the overall claims experience, which is dominated by property and conveyancing, and, in particular, lender-related claims. (For further details see Marsh’s Annual Report 2013 at www.marsh.co.uk/scotlaw and Journal, May 2013, 38.) Nonetheless, the claims which arise from wills, trust and executry work tend to be attritional – the same types of claim arise consistently year after year.

Delay in realising investments/assets

Although the claims experience arising out of wills, trust and executry work was unlikely to be as adversely affected by the recession as property and conveyancing work, insurers were concerned that the impact of volatility in the property and stock markets might result in losses and claims against trustees, executors and the solicitors acting for them. Delay in realising investments and other assets has always featured in the claims experience, but numbers have not noticeably increased as a result of the economic downturn. To that extent, it may be argued that the insurers’ concerns have been unfounded; but when such claims do arise, they tend to be costly.

Case study

Tardie & Co were acting in the executry of the late George Dunlappy. When the value of the deceased’s shares in Quickbuck Bank plc plummeted during the banking crisis, the executors made a claim against Tardie & Co for the loss to the estate, alleging that if Tardie & Co had not delayed in selling the shares, they could have been sold for a much higher price and the loss would not have occurred.

Possible risk controls:

• Diarise any relevant dates and countdown alerts where appropriate. • Review the file regularly.

Errors in distribution of estate

Overpayment of a beneficiary is, perhaps surprisingly, a common cause of claim and, regardless of the legal position, in practice the prospects of recovery from an overpaid beneficiary are often slim. Sometimes the problem arises from failure to ask the right questions, to investigate fully the family tree, or misinterpretation of the terms of the will. However, claims have also arisen from a miscalculation of legal rights, or failure to advise beneficiaries of their legal rights.

Case study

Following the winding up of George Dunlappy’s estate, a claim was intimated against Tardie & Co by the deceased’s daughter regarding non-payment of her legal rights and alleging that the correct “legal procedures had not been followed”.

Possible risk controls:

• Establish the “family tree” reliably.
• Verify the information given by executors/beneficiaries.
• Use a checklist to ensure that nothing is overlooked, e.g. the requirement to advise on legal rights before distributing the estate.
• Prior to distributing the estate, double-check beneficiaries’ entitlements and all arithmetical calculations.

Error or omission in drafting will

Claims also arise as a result of errors/ambiguities in drafting of wills. In these situations, allegations are made by disappointed beneficiaries that the estate does not devolve in the way that the testator intended. There are also cases where it is alleged that a survivorship destination has not been properly evacuated.

Case study

Tardie & Co prepared a will for Mrs Ina Dunlappy. In the will, as she had always promised, Mrs Dunlappy bequeathed to her longserving home help the house she had lived in for many years. The home help pursued a claim against Tardie & Co when, following Mrs Dunlappy’s death, it was discovered she would not receive the promised bequest as title to the house was subject to a survivorship destination in favour of Mrs Dunlappy’s ex-husband.

Possible risk controls:

• Explain to the client, and confirm in writing, how the estate will devolve and get client sign-off.
• Check the title to heritable property. Alternatively, in terms of engagement, inform the client that the firm will rely on information provided by him/her and will not carry out an investigation of the title to his/her assets. The same point could be repeated in a letter sending out the draft will and/or a file note of a meeting with the client.
• Consider having a colleague double-check the draft will.

Agricultural tenancies

Some years ago there was a spate of claims relating to agricultural tenancies. These claims relate to the tenancy of an agricultural holding being lost in the event of omission to take action to have the tenancy transferred to the intended beneficiary/successor. The claims experience has shown that these are all potentially expensive claims. A risk alert was issued to the profession at that time. Since then the frequency of such claims has been arrested, but claims do continue to arise from time to time.

Case study

Mr Pinetree, a chamber practitioner, was consulted by Mrs Undercroft following her husband’s death the previous week. Mrs Undercroft instructed Pinetree to attend to her late husband’s estate. Pinetree noted that the husband, who was a tenant farmer, had made a bequest to his wife of the tenancy. Pinetree resolved to deal with this following the ingathering of the rest of the estate and passed the file to his assistant, requesting that the assistant deal with all other matters, after which he would take back the file and deal with the transfer of the tenancy. By that time, a claim had been intimated against Pinetree because the tenancy had been lost due to his inaction. He had failed to serve the required notice on the landlord.

Possible risk controls:

• Promptly research the requirements of the current legislation or take specialist advice on the requirements. Do not dabble!
• Create an aide-mémoire prompting appropriate actions to be taken timeously in the event of the tenant’s death. Time limits are often tight.
• Consider placing that aide-mémoire with the tenant’s will and/or the tenant’s copy of the lease.
• Include a prompt in your checklists for the administration of both testate and intestate estates, drawing attention to the course of action required and the strict time limits where the estate includes the tenancy of an agricultural holding.

Russell Lang and Marsh

Russell Lang is a former solicitor in private practice, who works in the FinPro (Financial and Professional Risks) National Practice at Marsh, global leader in insurance broking and risk management. To contact Russell, email russell.x.lang@marsh.com

The information contained in this article provides only a general overview of subjects covered. It 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.

Marsh Ltd is authorised and regulated by the Financial Services Authority for insurance mediation activities only.