Special Focus: Professional Indemnity 2014 - Page 4

Special Focus: Professional Indemnity “ International clients are increasingly demanding upfront proof of insurance for sums insured far exceeding the legal minimum, and law firms are increasingly responding by obtaining such coverage. Margarida Lima Rego, Morais Leitão, Galvão Teles, Soares da Silva & Associados PII policies for lawyers in Spain are significantly less expensive than most other European countries. He says: “In fact, we estimate that of the 10 countries we covered for the report (Austria, Belgium, France, Germany, Italy, the Netherlands, Poland, Spain, Switzerland and the UK) only lawyers in Poland enjoy lower premium rates for PII.” It is a slightly different story in Portugal. Dores says that while an excess of capacity was driving Spanish pricing downwards, Portugal has fewer insurers offering PII. “The PI market is largely handled by the Lawyers Bar collective insurance programme, Ordem dos Advogados,” she explains. “The pricing of this scheme is probably the best barometer of the market conditions in Portugal.” According to the Council of Bars and Law Societies of Europe (CCBE), PII schemes are obligatory for individual lawyers and law firms in Portugal. Under Ordem dos Advogados rules, the association grants each individual registered lawyer minimum coverage of €150,000 (additional coverage can be purchased on top of this). The minimum PI coverage needed by a law firm is 50 percent of the amounts billed by the firm in the previous year. “Portuguese lawyers are subject to the general civil liability rules which apply to all citizens,” according to the CCBE. “The nature of civil liability applying to client-lawyer relationship is still discussed by scholars. However, major jurisprudence tends to consider such liability to be contractual or non-contractual depending on the concrete situation. Thus, if the lawyer fails to perform or performs defectively the obligations arising from the mandate he or she may by be held liable according to contractual liability rules – if, on the other hand, the lawyer commits an offence harming the interest of his client, then only non-contractual liability rules may apply.” Take precautions However, though professional indemnity cover is competitively priced and wider coverage is increasingly available, Iberian lawyers are reminded that there are some basic precautions that can be taken to reduce the risk of being subject to a claim. There are also steps that can be taken to ensure deadlines are kept, which will 54 • IBERIAN LAWYER • May / June 2014 also minimise the risk of a claim. Transparency and due diligence are important, especially for firms with large headcounts and international exposure. “It is important that internal protocols are in place in order to identify potential conflicts of interest,” Benito says. “This is particularly the case in larger firms, where these conflicts can frequently arise given the volume and size of their clients.” In Spain, Ruiz observes that legal professionals’ liability is ordinary liability, specifically liability by negligence or fault. Therefore, in legal professions, the work must meet the diligence level required in each case, which is greater than the usual “prudent man” in article 1104 of the Spanish Civil Code, as established by the Spanish Supreme Court Judgment dated February 4, 1992. He adds that this involves: “Keeping [clients] promptly informed, obtaining their written consent for any actions to be performed, sharing opinions regarding draft contractual or procedural writs and having them participate in everything related to defending their interests.” Dores encourages firms to inform clients about the pro and cons of their case. “Judges will tend to hold the lawyer liable if they are not able to prove that they informed their client about the risks of their cases,” Dores explains. “Thus, it is important that the information of the risk of the case is communicated in writing to the clients.” This is echoed by Jose Pimentel, partner at DAC Beachcroft Spain, who says: “Give clear advice, be proactive in the handling of the cases and take a prosettlement attitude, when applicable.” Martínez stresses that lawyers should always inform clients about the actual probabilities of success and about the possible costs involved, such as paying the other party’s legal costs if the case is not upheld: “Lawyers must be very careful when issuing opinions, inserting disclaimers regarding the information that has actually been provided.” Experts also emphasise the importance of experience, ensuring that academic education is complemented by practical know-how as it is younger lawyers that are more likely to make mistakes. Eduardo Albors, director of Albors Galiano Portales, concludes: “This knowledge about how to handle claims accomplishes one of the essential ingredients of how due diligence applies – the other important ingredient is more connected to the general understanding about the service side of the work to perform, in which the lawyer’s approach is to be framed by the knowledge that the main goal is to provide the best service possible to protect the client’s interests.” ” www.iberianlawyer.com