Marsh has issued a warning to law firms about the Legal Services Bill...
Marsh has issued a warning to law firms about the draft Legal Services Bill. The broker's European practice leader for Law Firms' professional indemnity, Sandra Neilson-Moore, said risk exposure is likely to rise as a result of the Bill allowing third parties to take up equity positions.
This will be exacerbated by the trend trend for law firms to move away from the traditional partnership model to a Limited Liability Partnership (LLP) model.
Neilson-Moore said: “Outside ownership interests will mean that decision making can no longer be wholly driven by what is good for the partners and the firm in the long term, but will ultimately be influenced by the desires of major shareholders for a return on their investment — sometimes a very quick return.
“Growth in all markets may be the goal and some firms may find themselves under pressure to produce growth at any cost. The LLP model, which strips away both the risk and the bonds of joint liability, may exacerbate this. The result of this change in culture is increased liability exposures for managers of a firm to its employees, shareholders and third parties. This may lead to a need for UK firms to purchase management liability and employment practices liability insurance. Few do so now.”
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