Top causes of PI claims for solicitors
Understand the common causes of claims and minimise the risk of a PI claim against your firm
In an increasingly challenging regulatory and client landscape, understanding the common causes of claims is essential for law firms seeking to minimise risks and maintain a robust risk profile.
Some of the top reasons for Professional Indemnity (PI) claims in law firms
Missed deadlines - One of the most frequent causes of PI claims is missed deadlines which can result in significant client costs or losses. Whether failing to issue proceedings before a limitation date or missing key milestones in litigation, errors like these can damage client relationships and reputations.
Errors in legal advice or drafting - Mistakes in legal advice or document drafting are another source of claims. Errors in commercial contracts, property transactions, or wills can result in significant financial losses or disputes for clients.
Conflicts of interest - Conflicts of interest, whether actual or perceived, can lead to client dissatisfaction and regulatory scrutiny. These conflicts might arise from representing multiple parties with competing interests or from a lack of robust client due diligence.
Data breaches and cyber security failures - In an era of digital communication and remote working, breaches of confidentiality have become a growing concern. These breaches can occur due to human error, cyberattacks, or inadequate data protection protocols.
Solicitor fatigue - In today’s high-pressure environment, where there is an increasing demand for longer working hours and to deliver more, employees are more likely to make mistakes. These errors are often simple, such as not following instructions, taking the wrong step in a process, or missing a time limit. However, these small mistakes can lead to significant issues and errors in work.
Improving a law firm’s risk profile through sustained and consistent risk control
Insurers recognise that while historical data provides insights into a law firm’s risk profile, current processes and their consistent application will carry the most weight. For insurers, tangible evidence of sustained and consistent risk control is critical to influencing underwriting decisions and premiums.
Many law firms, unfortunately, struggle to demonstrate consistent compliance. Even when robust policies are established, implementation or documentation often falls short. Compliance tasks can easily be neglected, especially when they are assigned to partners who are already overwhelmed with client work and practice management responsibilities. Without a dedicated compliance team or manager, it becomes challenging to maintain the administrative control required for an effective risk management system.
The Solicitors Regulation Authority (SRA) and PII providers take a zero-tolerance approach to unsupported claims of compliance. For them, a lack of documented evidence signals unmanaged risk - a critical red flag.
What can law firms do to improve their risk profiles?
Thorough Documentation - It is vital to ensure that all risk management actions, from file reviews to compliance audits, are accurately recorded and accessible.
Allocate Resources to Compliance - Law firms should consider appointing a compliance manager or team to oversee policies and procedures or where internal resources are not available, law firms could look to external expertise to oversee adherence to policies, controls and procedures (PCPs), and regulatory requirements.
Proactively Showcase Your Risk Management - When renewing PII, it is recommended that law firms provide insurers with a demonstrable overview of their risk management procedures and processes, showcasing their adherence to best practices and compliance.
Strengthen cyber security – utilise a platform such as CyberPrepare to identify vulnerabilities in security and controls. To find out more about how CyberPrepare can help your firm prevent cyber incidents and enhance your cyber maturity, watch our CyberPrepare Demo Video.
PI claims can have devastating financial and reputational consequences for solicitors and law firms but are largely preventable. By identifying and addressing common claims sources, legal professionals can significantly reduce their exposure to claims. Moreover, adopting a proactive and transparent approach to risk management not only satisfies insurers but also strengthens client trust and regulatory compliance.
Sessions for Solicitors – Stay Informed - PIB Insurance Brokers hosts regular Sessions for Solicitors which are free to attend. These are provided to help firms tackle risk management, compliance challenges, and professional indemnity obligations.