New indemnity rules will increase pressure on law firms to convert to limited...

New indemnity rules will increase pressure on law firms to convert to limited liability partnerships (LLPs), Legal Risk partner Frank Maher warned today.

Legal Risk is a firm of solicitors which advises law firms and other professional firms on risk management.

New rules in force from 1 October 2005 mean that insurers providing cover under the Law Society's compulsory insurance scheme for solicitors can limit cover for any number of negligence claims arising from similar mistakes to a total sum of £2m, Maher said.

According to Maher, if claims from several different clients are added together with one limit, the individual limits negotiated with them would be virtually worthless as terms cannot apply across the firm's client base.

Even for large firms with £100m cover or more, this has knock-on implications, because insurers covering the higher layers are expected to follow suit, Maher said.

Legal Risk said: “Limiting liability through contract terms is only part of a strategy for managing risk, not a standalone solution.”

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