Wednesday 18 January 2012

Are you sure that you are insured ?

Having recently recommended Travelers as preferred insurers, the Law Society and the Solicitors Regulation Authority are to take on the insurer over its aggregating of fraud claims and subsequent capping of a solicitors’ professional indemnity insurance policy. Such a move by Travelers has significant implications on the industry.

According to on-line insurance magazine The Post the original claim arose out of the activities of a conveyancing partner at a long-established Berkshire solicitors firm, Willmett Solicitors. Before resignation the partner had been, for some years, involved in a number of allegedly fraudulent conveyancing transactions, which SRA and Law Society claims unbeknown to other partners. Once the losses came to light as a result of the financial crisis numerous claims were brought against Willmett Solicitors and its partners by various lenders, including the claimant Godiva.

Willmett Solicitors has subsequently gone into liquidation and has no funds to meet the claims. Travelers assert that all activities arising from the individual partner's involvement in alleged frauds can be aggregated as ‘one claim' and therefore refuse to pay further sums beyond the £2m. In consequence, some of the innocent partners at Willmett have already been made bankrupt and the remainder are facing bankruptcy.

Law Society chief executive, Desmond Hudson, said: "It was vital that we, as well as the SRA, were able to intervene in this case. The insurer's interpretation of the aggregation clause, which led them to cap their insurance indemnity, could have widespread significance for the public as it will affect many claimants' right of redress.
"It is also of great concern to the profession in terms of their PII coverage and hence to the Society to ascertain how aggregation applies in a case such as this. Our members need to have confidence in their PII cover, and this could cast doubt on what they and their clients are protected against."

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