Cover lines

How much is enough?

Is it worth taking on new business that might require additional PII cover? Russell Lang suggests some questions a practice should address

Whatever their range of clients and activities, solicitors’ practices regulated by the Law Society of Scotland and covered by the Master Policy all have cover for the compulsory level, currently £2 million for any one claim. For some firms, that is more than adequate, while others require substantial additional “top-up” cover, reflecting their assessment of the risk exposures associated with higher value engagements or, in some cases, to comply with specific requirements of commercial clients’ terms of appointment.

It makes good sense to review the adequacy of the firm’s cover on a regular basis and, while there may be no single correct answer, there is guidance available from Marsh to assist the decision making process. Aside from periodic proactive review, questions regularly arise when firms are considering the cost-benefit of taking up new business opportunities:

• If we decide to increase our cover because of a higher value engagement, how long would we need to maintain the higher level of cover?
• Can we pay an additional premium to increase our cover for a higher value engagement?

The answers to these questions can be found on the Marsh website, but addressing the final question, the short, and perhaps inconvenient, answer is No. PII cover is on a “claims made” basis, which means it may be necessary to maintain the increased level of cover beyond completion of the engagement, perhaps for a number of years – incurring an annual premium for top-up cover.

If the reason for considering top-up cover is a single higher value engagement, before committing to the engagement it makes sense to consider whether the remuneration justifies the projected cost of the top-up cover for the required number of years.

Cost-benefit assessment

If the forecast additional cost of top-up cover was estimated to be £3,000 per annum, and was to be maintained for up to five years, is the fee for the work sufficient to cover the forecast £15,000 cost of the additional cover? Or could the additional cost be justified by reference to other higher value transactions the practice is undertaking?

How would you answer the following questions?

• How should we go about deciding what level of PII cover we ought to have?
• Does it make any difference that we always cap our liability to clients?
• Does the fact that we operate as an LLP or limited company make any difference?
• In the event of a claim, is it our current level of cover that applies, or is it the level of cover we had at the time we were doing the work?

Office insurance

Does your cover measure up?

For busy lawyers, a review of your current office insurance policy may be some way down your list of priorities. However, inertia may mean that your existing cover is insufficient, or you miss out on a more cost-effective solution. Take the quiz below to see if it’s time for a review

How often do you review your policy sums insured and terms and conditions?

1. We often make changes and talk to our insurance broker throughout the year.
2. We review the policy at every renewal.
3. We just renew the policy on a roll-over basis at renewal – it’s so convenient!

How many warranties and conditions are on your policy?

1. None, policy is warranty and condition free.
2. A few, but we believe we comply with all.
3. Lots, and I think we comply with most of them.

For firms involved in property sales, does your policy include conveyancing cover?

1. Yes, and we can choose the limit.
2. Yes, but restricted to a set cover limit.
3. No, I didn’t know that cover was available.

If you were unable to work from your office due to flooding or fire damage, how would the business cope – do you insure for business interruption cover?

1. Yes, we insure additional costs of working because it is unlikely we will lose fee income due to a fire/flood at the office.
2. Yes, we insure for the traditional loss of income.
3. Maybe, I’m not sure without checking.

With reports of cyber-crime against UK firms on the rise, how would the firm protect against a virus or hacking attack?

1. Our Office policy includes virus/hacking cover as standard.
2. Our Office policy can provide virus/hacking cover as an optional add-on for an additional charge, or we purchase a standalone policy.
3. I didn’t know that cover was available and we may be at risk against potential cyber threats.

How would the practice respond if one of the key personnel/fee earners is absent due to injury or illness? Does your policy include locum cover for key personnel?

1. Yes, included as standard.
2. Yes, it’s an optional add-on for an additional premium.
3. No, I didn’t know that cover was available.

If any of your office contents, computers or laptops are stolen, how does your policy respond to theft claims?

1. Our policy offers full theft cover including walk-in walk-out theft.
2. Our policy only covers theft with forcible and/or violent exit or entry to the premises.
3. Our policy only covers theft with forcible and/or violent exit or entry to the premises and we have to have an alarm system in place.

Your answers

Mostly As – sounds like you may have a good policy in place; perhaps you are already insured through Marsh!

Mostly Bs – Looks good, but it may be worth arranging a review of your policy to ensure your covers match your firm’s requirements.

Mostly Cs – There may well be room for some improvement in your current arrangements. It could be a good time to consult an Office insurance specialist!

HOUSE AND CONTENTS insurance

For peace of mind opt for specialist advice

If you own higher value property, consider specialist advice and tailored insurance products to strike the right balance between price and protection

The rise of “price comparison” websites has arguably created a false impression that all home insurance policies are basically the same, and that getting good value equates to getting the best price.

The reality is very different, particularly if you own a higher value property – usually defined as subject to a rebuild cost of more than £500,000. Price is only part of the picture, and getting good value means finding a balance between price, protection and personalised service. That is, while the cheapest standard policy may be adequate for the average three-bedroom home, it may be a false economy for higher value homes.

In particular, the risks to your home and contents may be more diverse, the potential losses more significant and the process of replacement or repair more involved – especially if you own expensive jewellery, fine art, antique or bespoke furniture. As a result, you will almost certainly need the kind of tailored protection that standard household policies simply do not offer. You also need to be sure that you have adequate insurance cover in place to protect the full value of your property and its contents.

Unfortunately, if you fail to get adequate cover, you may not find out until you come to make a claim, by which time it is already too late.

As a legal professional you no doubt have a hectic schedule, often juggling work and personal commitments – time is money. Any down time you have is precious, so why spend it on activities we can manage for you?

Working with a specialist broker helps overcome the issue of under-insurance. Marsh can help you ensure that your home and possessions are valued correctly and insured for the right amount, so you have peace of mind from the outset knowing exactly what is covered and for how much.

To arrange your tailor-made insurance solution, Marsh works with specialist insurers who have the flexibility to adapt to even the most complex risk scenario.

Our private clients team has a wealth of experience and specialist knowledge:

• Higher value homes and contents
• Luxury cars – for example, prestige, performance and classic cars
• Fine art and collections
• Jewellery and other valuables
• Overseas properties and travel
• Bloodstock and equestrian owners and businesses
• Yachts and boats.

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

Mercer Marsh Benefits is a service provided by Mercer Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales No. 984275. Registered Office: 1 Tower Place West, Tower Place, London, EC3R 5BU. Marsh Ltd is authorised and regulated by the Financial Conduct Authority for insurance mediation activities only. © Copyright 2013 Marsh Ltd All rights reserved.

Fidelity guarantee insurance

In a harsh economic environment, when businesses and individuals may be facing financial challenges, the incidence of fraud and dishonesty tends to increase. Experience shows that even trusted colleagues are capable of dishonesty if they find themselves in circumstances where they have both motive and opportunity.

Frauds may be committed by those one would least suspect, including senior, long-term and trusted colleagues who are first time offenders.

If considering cover for financial loss (not covered by the firm’s PII cover) resulting from fraud, dishonesty or malicious acts, consider whether the policy would:

• Cover fraud, dishonesty and malicious acts by employees and principals of the business; and by third parties.
• Reimburse the practice for the (doubled) excess under the Master Policy in the event of a claim arising as a result of theft of client funds.

Business Protection Insurance

Could you face the unexpected?

No one likes surprises, and as the economic outlook remains unpredictable, it’s vital that practices make good financial planning a priority in order to protect themselves from the unexpected.

Has your practice considered the impact, or likelihood, of a key colleague dying or becoming critically ill? The statistics can be surprising.

Likelihood of at least one partner/director getting a critical illness before age 65**

*Based on mortality data from TMN00 (temporary assured lives, male non-smokers, 1999-2002) at five plus years’ duration. **CIBT02. Based on 1971-2003 population data and experience, published in SIAS paper “Exploring the Critical Path”, 2006. Males, stand-alone, extended cover, including own occupation and total and permanent disability.

• Do you have key colleagues who are central to the prosperity of your business?
• Do you have a new CEO, finance director or other significant contributor?
• Are you going through a merger or acquisition?
• Is your growth financed by borrowing or capital?

AFTER THE EVENT INSURANCE

Benefits for client and firm

James Jobling explains the potential risk benefits to clients contemplating commercial litigation

A: Generally speaking, AtE insurance is legal expenses insurance cover which can protect pursuers against their opponent’s adverse costs. Furthermore, AtE may also be extended to cover your clients’ own outlays, including expert and counsel’s fees.

A: AtE insurance is potentially relevant in several areas of commercial litigation, including insolvency, professional negligence, property disputes, construction disputes, debt recovery, contractual disputes and contentious trusts.

A: Litigation obviously carries risks and, for some, the potential costs may make litigation cost-prohibitive. AtE insurance can enable clients to proceed with commercial litigation more confidently by safeguarding against the potential costs of losing and having to pay the other side’s costs. Also, it can improve a client’s financial profile by enabling them to litigate to recover bad debts.

A: I believe there are, in part because AtE provides a way of addressing clients’ “risk v reward” concerns and allows them to proceed with litigation. Also, accessing and advising on innovative insurance solutions may provide a means of differentiating solicitors from their competitors.

A: I’d be delighted to. For an explanation of what’s involved or for an idea of premiums, please contact me today.