We reveal our top three contributors of claims notified to Aon Claims Solutions (“ACS”) in the past year.  Residential conveyancing remains the top contributor of notifications made to ACS but an increase in trust and Probate claims pushes personal injury and litigious matters into third place.

First place – Residential Conveyancing
Despite the downturn in transactions, residential conveyancing notifications retain first place and account for almost half of all claims received in the past year.
A large proportion of the claims relate to imprudent and reckless lending practices, particularly in the buy-to-let market.  When the market turns, mortgages approved at high loan-to-value ratios and that are self-certified are a particular risk.  The main failure by solicitors is not having due regard to their instructions embodied within parts 1 & 2 of the Council of Mortgage Lenders Handbook.  These instructions place onerous obligations on solicitors (i.e. to report any deposit provided by a 3rd party) and can lead to a breach of duty.
Other problem areas include:

• failures to undertake sufficient searches over properties;
• failures to advise on the difference between joint tenancies and tenancies in common;
• delays in registration of title, charges and restrictions within the priority period; and
• failures to identify restrictions over land preventing use or development.

If firms conduct high volume, low value conveyancing transactions they need to have robust procedures in place to ensure instructions are followed and full reports are provided.  A handful of high value conveyancing claims could result in an otherwise good firm becoming uninsurable on the open market.

The Law Society’s Conveyancing Quality Scheme should provide useful safeguards and prove a firm’s commitment to high standards to insurers on the open market.

Second place – trust and probate
Trust and probate claims have risen to the second largest of all notifications in the past year.  These claims are particularly problematic because a small ‘slip’ (such as not having evidence proving the testator was advised that a subsequent marriage invalidates a standard Will) can prove very costly to resolve and often do not have satisfactory avenues to rectify the error.  Delays in administering estates (including collecting in, investing, selling and paying inheritance tax on assets) continue to cause claims.

The recent authority of Rudyard Kipling Thorpe v Fellowes Solicitors LLP [2011] EWHC 61 is helpful in challenging the argument often presented by disappointed beneficiates that elderly clients automatically lack capacity.  However, it is crucial that detailed attendance notes are made as evidence that the client did not obviously lack capacity.

Third place- personal injury and litigious matters
Personal injury and general litigious matters together share third place.  The problem areas can be summarised as follows:

• Failure to comply with time limits.  The classic example in personal injury is the failure to issue proceedings within the three year limitation period.  However, a problem that permeates across all litigious matters is the failure to comply with Court time-limits and Unless orders.  Unlike, trust and probate claims rectification is often possible (albeit with cost consequences) so long as the matter is notified to your insurer as soon as a problem occurs;
• Poor advice on the prospects of success.  Claimants feel let down by the result of litigation, particularly when faced with an unexpected and often significant cost liability.  Whilst a solicitor isn’t expected to guarantee the outcome of litigation, a failure to keep the client informed of the prospects of success at regular intervals in the litigation can result in a claim, particularly where robust advice at the start of proceedings is not revised until the eve of trial (and at the same time as the client is asked to put significant funds on account);
• Inadequate investigation and collation of evidence in support of a case; and failure to name the proper parties as claimants or defendants to an action.

As can be seen, 2010 proved to be an eventful year with significant changes to the MTC.  The Solicitors Regulation Authority has announced further changes to the MTC for 2011 and beyond, particularly in relation to the role of the ARP.
Claims continue to arise not as a result of a lack of understanding of the law, but as a result of not closely supervising staff and simple administrative mistakes.  The key to minimising claims is to have adequate risk management procedures in place.

Mark Durkin
Solicitor
Aon Claims Solutions

Grahame Davidson
Director
Tel: 0117 948 5117
E-mail: grahame.davidson@aon.co.uk