Indemnity Costs Place Small Law Firms at Risk

The Birmingham Post (England), November 11, 2010 | Go to article overview

Indemnity Costs Place Small Law Firms at Risk


Small law firms in the West Midlands are at risk of being driven out of business by crippling insurance premiums. A survey of its members by Birmingham Law Society reveals that sole practitioners across the West Midlands faced massive professional indemnity insurance (PII) hikes this year.

However, larger firms fared much better with rises on average of less than 10 per cent and some firms were able to secure a discount.

Law firms are required to take out professional indemnity insurance to cover any negligence claims brought against them by clients.

However, the disparity of rates between small and large firms is growing. Dean Parnell, president of Birmingham Law Society, said: "For some years the gulf between small and large firms has been widening. However, it has now become cavernous."

Mr Parnell predicts that there will be greater consolidation in the profession as a result, with many High Street firms having to give careful consideration to some of their practice areas.

Worcestershire practice Brownings Solicitors recently went into administration, citing a pounds 100,000 PI bill as one of the reasons. It was acquired by Solihull firm Harris Cooper Walsh.

It is not just the rise in premiums that is causing concern. The profession's curious renewal set-up, whereby all PII renewals happen on September 30 each year, continues to create problems.

Many firms complained that proposal forms were too lengthy and over complicated, and that they had been given impossible deadlines in which to take up an offer.

One firm was given just seven hours to respond, before extracting a three-day extension from their broker.

Some insurance brokers also demand a 'sole appointment' and refuse to share information, making it difficult for firms to get competitive quotes.

Property conveyancing is an area of practice which tends to be penalised by insurers, due to the high proportion of claims in this field. This is traditionally a core service for smaller firms. …

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Indemnity Costs Place Small Law Firms at Risk
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