19 August 2004 Solicitors are being urged to review their client engagement processes as new research from Zurich Professional suggests that nearly a quarter (23%) of firms are laying themselves open to claims by not identifying all parties to whom they owe a duty of care.
While there is an increasing trend on the part of solicitors' firms to impose financial caps on their liabilities, which can be effective components in a firm's risk management strategy when claims are made, Zurich believes that avoiding claims in the first instance by addressing the firm's underlying exposures and the causes of claims should remain the priority.
The research reveals that nearly one in ten (8%) firms never confirm the authority of those clients for whom they are purporting to act - a worrying trend in the light of the importance given to the "know your client" imperative in the context of the money laundering regulations.
Also at risk are those firms (23% of those surveyed), who confirmed that they do not as a matter of routine practice identify to whom they owe a duty of care including to non-client third parties.
As further evidence of the need to address issues of engagement management almost half of the firms surveyed confirmed that they never send a non-engagement letter to prospective clients that they have declined to represent.
The survey also revealed that almost 65% of firms never seek to limit their liabilities to clients and 64% never seek to limit their liabilities to third parties.
Andrew Nickels, Risk Manager for Zurich Professional commented on the findings, "We support those firms which are seeking to limit their liabilities by negotiating financial caps with their clients in the event of a claim. But we also are urging all firms to review basic client engagement processes, including client selection procedures and the identification of all parties to whom they owe a duty of care. Addressing such fundamentals at the outset can significantly reduce a firm's exposure to claims and help manage the cost of insurance over the long term."
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For further information contact
Susannah Jeffery, Zurich Financial Services on 01489 561559
Sources
Research carried out by: Response Analysis & Mailing Ltd
Sample: 305 solicitors
Date: June 2004
Notes to the editors
Zurich Professional Limited (http://www.zurich.co.uk/professional/home/introduction.htm), a member of the Zurich Financial Services Group, is a business dedicated to servicing the professional indemnity insurance market for solicitors in England and Wales and accountants and other miscellaneous professions in the UK. Launched in May 2000, initially into the solicitors market, Zurich Professional currently insures 1 in 3 firms of solicitors in the market.
Zurich Financial Services is an insurance-based financial services provider with a global network that focuses its activities on its key markets in North America and Europe. Founded in 1872, Zurich is headquartered in Zurich, Switzerland. Zurich has offices in more than 50 countries and employs about 62,000 people.
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