Monday 14 July 2014

Risky Business

An observation from the trenches: Conveyancing lawyers aren’t very good as assessing risk. They tend to overinflate those that have the lesser ramification and underestimate those that pose a real threat.

To be fair, they are in good company. Lots of business focus on risks that simply don’t exist or, at most, pose little threat. Does an airline pilot really need to surrender his tweezers at airport security when he's about to board an aircraft equipped with an axe on the back of the cockpit door? Can a mobile phone really cause a major explosion at a petrol station?
Many a lawyer would think that the  exposure to claims results from a drafting error or  lack of knowledge.  Insurance company research,  however, shows that just one in eight claims against law firms arises from lack of legal knowledge, while one in three claims is sparked by seemingly small mistakes in ‘legal housekeeping’. One only needs to review the latest question identified on PI renewal forms so see that these are areas of concern.Yet law firms concentrate their resources on developing legal expertise rather than improving administrative processes.

Identifying real risk is difficult. Contrary to public opinion, conveyancers are human and, like most people, exaggerate spectacular but rare risks and downplay common risks.
I am sure that many conveyancers can think of examples where a  lawyer acting for a purchaser has raised an issue that is never likely to result in a claim. I am all for making sure that you look out for issues that concern the buyer or borrower -- and by all means check that there is are guarantees for woodworm treatment etc. But has a lawyer ever been sued for not making sure that a dry rot guarantee has been assigned?
On the other hand, some lawyers tend to forget that the lender is also the client and there are detailed, strict lender requirements that change often. This is where the frequency and volume of claims occur. It is failing to comply with those obligations that potentially cripples a firm. The evidence is clear: Nearly 25% of all claims against solicitors as a whole are lender driven.

An evidenced-based approach to risks in questioning the frequency of claims is what Lexsure focused on when building COMPLETIONmonitor. Of course firms can add questions to their checklist but the core of system focuses on where the most common areas of claim are.

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