High Court cases against solicitors for professional negligence almost tripled in a year according to City law firm RPC. Many of the claims involve property and conveyancing disputes with sub-prime mortgage lenders resulting from the 2008 financial crisis.
RPC says the jump is due to the fast-approaching six year time limit to make claims resulting from the credit crunch.
“On the face of it, this looks like a pretty shocking, sudden and unexpected rise,” said Joe Bryant, Partner at RPC. “However what we are actually seeing is a something of a delayed reaction, as many of those who lost out as asset values, such as property prices, plummeted in the fallout from the credit crunch, make a last-ditch attempt at recovering their losses. Claimants – many of them lenders – are rushing to launch claims for perceived professional negligence against law firms before they run out of time.”
Most property negligence claims in recent years have been against surveyors accused of over-valuing property, but now lenders are increasing their fire on the legal profession. Many claims are for poor conveyancing, failure to spot fraudulent mortgage applications or loan mis-selling according to RPC. “These kinds of claims against solicitors are likely to be far less clear cut or straightforward to prove,” said Joe Bryant.
Whether the claims are valid or not, they will have an adverse impact on the solicitors’ PII market, believes James Page, Associate Director, Brunel Professional Risk. “Even if many of these claims are thrown out, insures will have to reserve for the claims and meet the cost of defending the actions. This is likely to further impact an already difficult solicitors’ PII market – especially for those firms with large property exposures,” he said.
James Page says that solicitors should make sure that they have effective risk management procedures and a good claims record. “Underwriters are looking to insure the best managed law firms, so being able to demonstrate high quality risk management controls and provide a clear explanation of any previous claims can make all the difference in securing a competitive quote at the next insurance renewal. It is never too early to start preparing and we are ready to help all our solicitor clients with risk management, claims handling and presenting their practice to the insurance market,” he added.