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
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