Nowhere is the schism between the bottom and the top of the legal profession more evident than within the solicitors’ PI insurance market, according to industry experts.
Current projections for this year’s professional liability insurance renewal deadline of October 1 indicate that the top 100 firms can expect their premium prices to remain relatively stable. However, those solicitor firms that are financially circling the drain will most likely have to face rate increases to their business liability insurance cover of as much as 10 per cent, experts say.
Experts point to individual claim activity in excess of £100 million against both Freshfields Bruckhouse Derringer and Linklaters since the beginning of the year as evidence of coming rate hikes. Such high-volume claims have been suspected of triggering solicitors’ PI insurance rates in the past.
Linklaters was hit with a £115 million professional negligence claim this past February, stemming from advice it provided to Credit Suisse regarding a 2001 deal with Parmalat, an Italian food giant. The claim was hot on the heels of the Court of Appeal declaring Linklaters to be liable for a £37 million negligence claim brought by Levicom, a telecoms company, against it, which had been subsequently settled out of court.
Meanwhile, Freshfields has had to face a massive individual claim as well. The firm was slapped with the London Underground’s £140 million claim over advice it provided its Public-Private Partnership line in regards to the ill-fated Metronet fiasco.
When such claims are brought against solicitor firms, it is typical for the firms’ insurers to take care of the defence of the claims, including any court costs. Oftentimes this will result in a premium rate increase in reflection of the apparent bubble in these firms’ risk profiles.