Special Focus: Professional Indemnity 2014 - Page 3

Special Focus: Professional Indemnity documentation provided by clients.” “ Our perception is that claims against law professionals have increased, not only because the literature says so, but because it is common knowledge in the professions that this increase is real. Juan Antonio Ruiz Cuatrecasas, Gonçalves Pereira Don´t miss deadlines Dores agrees that missing deadlines is risky, adding that one of the key points is that the limitation periods established in the Procedural Rules are compulsory, which means that they cannot be changed by the defendant, plaintiff or the judge. Citing “preclusion”, or the barring principle, she says: “According to this rule, each stage of the proceedings has a fixed and final deadline which cannot be extended and beyond which no further applications, motions, submissions and so on, are admissible.” She adds: “Decisions and orders based on each complet ed stage are therefore irrevocable. The parties must attach, to the Particular of Claims or to their defence, all the documents or evidence on which their allegations are founded. The parties must also set out in details each specific allegation.” The consequence of preclusion is that when a lawyer has missed a deadline, such as the legal 20-day period to submit a defence, the defendant has not got the right to submit such a defence or the corresponding allegations or documents. Paulo Cruz Almeida, partner at Kennedys in Lisbon, cites the example of Portuguese decree law 303/2007, which changed the appeal deadlines and gave rise to several situations where lawyers were left exposed to claims because confusion over the new deadlines led to them being missed. Other insurers are seeing an increase in claims relating to areas other than litigation. Almudena Benito, Madrid-based director of professional indemnity in Willis´ FINEX division, says the main areas in which the insurance broker has seen professional indemnity claims are M&A, real estate and banking. Market insiders also cite tax advice, medical malpractice advice and insolvency proceedings as areas giving rise to professional indemnity claims – insurers observe there has been an increase in requests for insurance from lawyers acting as insolvency administrators, a role that is in demand in light of the economic crisis. Insurers point out that claims from international clients, in particular, are on the rise, resulting in medium-sized and large firms looking to increase their limit of indemnity. Margarida Lima Rego, a senior lawyer at Morais Leitão, Galvão Teles, Soares da Silva & Associados, says it was very difficult for a Portuguese law firm to obtain insurance coverage for sums comparable to those obtainable in most of Western Europe up until a few years ago. She adds: “The situation is now very different, as it is possible for a law firm to negotiate professional liability insurance up to the desired sum. International clients are increasingly demanding upfront proof of insurance for sums insured far exceeding www.iberianlawyer.com ” the legal minimum, and law firms are increasingly responding by obtaining such coverage.” Big business The good news for lawyers is that professional indemnity insurance is getting cheaper. Benito says the Spanish professional indemnity insurance market continues to offer cheaper rates, given the increased competition and capacity for this type of risk: “Notwithstanding the main insurers writing the majority of this business at competitive rates, broader cover remains the same as in the last few years.” Professional indemnity insurance (PII) – which protects lawyers and a range of other professions (including architects, doctors, and engineers) against negligence claims has become big business during this time. That said, the market has decreased in size in recent years. In Spain, for instance, the overall size of the PII market in terms of gross written premiums was estimated at €417.7 million in 2009, according to market research company Finaccord. By 2013, that figure had dropped to €393.3 million. Bernd Bergmann, a consultant at Finaccord, notes: “We estimate that there has been an especially severe decline in the Spanish PII market for the segments of estate agency and property, marketing professionals and architecture and engineering, due to worsening economic conditions in the underlying segments. By comparison, the PII market conditions for the legal services segment have been more stable.” Claims relatively rare Legal services have traditionally been less risky that other professions. The robust ´counter-cyclical´ nature of the work – which is mainly theoretical without the physical risk seen in other areas, such as medical and construction – and the specialism of law firms (lawyers are probably the best-placed profession when it comes to fighting negligence claims) have made claims relatively rare. This lack of claims encouraged more insurers into the legal PII market. Manzano says that 10 years ago the PII market was very concentrated, with most policies held by specialist firms. “Since the financial crisis, however, many more insurers have decided to enter the market,” he adds. “Competition has become very intense and driven down the costs considerably, to the point some lawyers can get an annual PII policy for as low as €50.” Bergmann adds that Finaccord research found that May / June 2014 • IBERIAN LAWYER • 53