Professional indemnity 2015 - Page 4

Special focus: Professional indemnity work is vulnerable to professional indemnity claims because there are strict deadlines to file submissions, writs and appeals with courts. The failure to meet these deadlines cannot be remedied generally and leads to the dismissal or rejection of the client’s action. “Clients have ceased to see the lawyer’s role as an obligation to provide means and now see it as an obligation to produce results,” Martínez adds. “When the lawyer loses a case, the client can feel tempted to try to obtain the same results by suing his or her lawyer. The same applies, for instance, on a deal – a clause drafted by a lawyer signifying obligations unexpected or undesired by the client can be the basis for a future PI claim.” In Portugal, previous judicial decisions would indicate that litigation seems to be by far the riskiest type of legal work in Portugal, according to Lima Rego. “The type of action or omission that seems to trigger the most lawsuits is that of missing a deadline within judicial proceedings,” she says. “Deadlines such as those applicable to the right to submit a statement of defence or the right to appeal appear to be the most common – in any case, when comparing our jurisdiction to others we would say that the number of negligence claims against lawyers is still fairly low.” Lawyers buying more professional indemnity cover, says insurer Lawyers are buying an increasing amount of professional indemnity insurance according to Santiago Garaizábal Valle, sales director for large accounts at insurer Caser Seguros. “Lawyers´ prudence has increased in recent years with regard to buying insurance,” he says. “This has had an impact in that there has been an increase in the amount of secondary insurance that is purchased to provide a greater degree of coverage in addition to the basic coverage offered by the lawyers bar associations.” He adds that, as a result, Caser Seguros is developing new policies for lawyers, which are mostly “professional indemnity insurance for law firms and D&O insurance, among others”. 54 • IBERIAN LAWYER • May / June 2015 “ Even so, lawyers Over the last ten years we say examples have witnessed an increase in of the recurring negligence claims against legal problems that lead advisors. to many of the PI claims against firms Margarida Lima Rego include: allowing Morais Leitão, Galvão Teles, substantive Soares da Silva & Associados prescription or expiry periods (MLGTS) for submitting complaints to all precautions when advising elapse; allowing procedural periods clients. “Keeping [clients] promptly for answering complaints or filing informed, obtaining their written appeals to elapse; not giving clients consent for action to be taken, information; omitting relevant sharing opinions regarding draft requests or elements from legal contracts and procedures, and statements; and failing to return ensuring their participation in documentation provided by clients. everything related to defending their interests,” Ruiz comments. Need for vigilance “These are the criteria and steps Ruiz says: “Other potential areas of to follow to reduce the risk of liability for lawyers not connected professional indemnity claims.” to legal actions include giving Muñoz Villarreal, recommends inappropriate tax advice and wrong four key areas of good practice: advice on acquiring properties that proactivity and close contact do not meet the legal requisites to with clients, including regularly be used for the use intended by the reporting to clients with updates; purchasers.” realistic and clear advice on the While insurance is critical in relevant case and all its possible protecting lawyers´ and firms´ outcomes; strict observance of the interests, Martínez says lawyers deadlines in litigated cases and of need to be vigilant with regard to the applicable limitation periods in standards and internal processes non-litigated cases; and not taking in order to avoid having to use any step without the client’s express their PI policies. She adds that this authority. approach should be adopted from Benito also suggests that firms the very outset of an instruction. put adequate firm-wide procedures “First and foremost, lawyers must in plac e so the risk of a PI claim be very careful when issuing a letter is reduced. “In order to identify of engagement or undertaking potential conflicts of interest, it is any kind of work,” Martínez says. important internal protocols are “Proper disclaimers – regarding the updated and in force,” he says. “It information that has been actually is the way that law firms are able to provided or the purpose of the control their risk – currently, most instruction, for instance – must be claims are caused by advice related used.” She adds that lawyers should to financial matters and breaches of always inform their clients regarding judicial deadlines.” the probability of their action being Manzano, who warns lawyers successful, as well as telling them about future exposure in relation to about the costs that the exercise of issues such as cyber and anti-money an action may incur, such as paying laundering, suggests applying the other party’s legal costs if the “basic risk management principles”, lawsuit or appeal is not upheld. starting with an internal risk Lawyers should also focus on assessment of their own professional following existing legislation. negligence exposure, their historical In Spain, for instance, legal claims and previous incidents. “In professionals are subject to other words, learning from their ordinary liability, that is liability own experience,” he concludes. by negligence or fault. Therefore, “Quite an obvious thing to do, but their work must meet the diligence professional firms do not always level required in each case, taking pay enough attention to it.” ”