10 Common causes of PII claims against solicitors

1.

Mental health and wellbeing of fee earners

There is no doubt that there is a link between poor mental health and wellbeing of fee earners and PII claims. However, both solicitors and the PII community have been slow to highlight the issue and this might be the first time that you have seen mental health and wellbeing on a list of “common causes” of PII clams. While a matter might initially present itself as being related to a practice issue, such as a missed time limit or conflict of interest, in many cases stress or poor mental health and wellbeing will be the “root cause” or catalyst for the error or omission.

When fee earners are tired, stressed or anxious, it can be a challenge to simply get through the day. Short-cuts happen, diaries don’t get checked, and it can be difficult to tell clients what they don’t want to hear. People also worry that asking for help will reflect badly on them.

We encourage all firms to put this issue on their agenda. Those engaged in any management or supervision roles need to be alert to the warning signs, which can include a decline in performance, physical symptoms of distress, and uncharacteristic behaviour. Firms must also ensure they are able to respond appropriately, for example by providing support, access to external counselling services and allowing time away from the office or adjusting workloads and responsibilities.

2.

Cyber security issues

We have previously reported that the Howden claims team has seen an increase in notifications from law firms relating to cyber incidents¹.  This is consistent with reports of an increase in cyber security issues in the wider community as a fallout of the pandemic. Where a cyber incident results in a PII claim, and particularly one related to the loss of funds from the client account, the cost to PII insurers can be considerable and will almost inevitably lead to an increased PII premium.

The SRA Thematic Review on Cyber Security published in 2020² confirms that many law firms need to do more work to ensure that they are adequately protected. Howden recently published an article entitled “10 Point Review of Cyber Security Issues for Law Firms” available here. Firms might be interested to consider this as a starting point to identify areas where further attention is needed.

Firms also need to be aware that some losses arising from a cyber incident will not be covered under their PII policy. For example, your PII policy will not cover significant costs such as:

• specialist assistance and support to mitigate an incident
• reporting to the ICO under GDPR
• communicating with affected clients
• financial impact of the interruption to your business.

These are all issues that can be covered under a separate cyber policy and we strongly recommend you investigate purchasing cyber cover if you do not already do so.

3.

Client selection

On the one hand clients are fundamental to the success of your firm, but if you do not choose clients wisely, they can also be the source of complaints and PII claims. In our experience firms should beware of clients who:

• change advisors frequently
• don’t believe in engagement letters
• insist on “execution only” and limited retainers
• give instructions through a third party (or not at all)
• are poor payers
• promise lucrative work in future, if you work for a discount now
• have a lawyer cousin/friend/neighbour second-guessing your advice.

Sometimes it will be part way through the engagement that it becomes apparent that a client is acting in a way that increases the risk profile of the matter you are dealing with. All fee earners should be encouraged to seek assistance in this scenario, so that a plan to “manage” the client and their expectations can be put in place.

4.

No engagement letter – or failure to properly record scope of retainer

Insurers see too many files that either do not have an engagement letter at all, or have one that is inadequate. For example, sometimes the retainer is not properly defined or cost information is absent or inadequate. Not only does this scenario increase the potential for claims, it is also the first hurdle in defending them.

Fee earners need to take time to ensure that the engagement letter clearly sets out the work they will be carrying out, next steps, likely timescale and the best possible information on costs. Also be sure that engagement letters set out what the firm will NOT be advising on – such as tax matters.

Engagement letters should also be regularly reviewed to address any “creep” in the scope of the retainer during a matter. If the scope changes, a new letter should be sent out clearly identifying the change – and any adjustment to cost estimates.

5.

Lack of file notes

You would be surprised how often the defence of a professional negligence claim is compromised by the lack of attendance notes for meetings and telephone calls. We cannot over-emphasise the importance of contemporaneous attendance notes that carefully record discussions that have taken place and the advice sought and given.

If there is no file note, courts will generally prefer the evidence of the lay client for whom the transaction was a “one off”, as opposed to the recollection of a busy solicitor handling multiple matters, both at the time of and subsequent to the file that is the subject of the claim.

6.

Missed time limits

Missed time limits can arise across various practice areas and include a range of issues such as filing court documents, exercising a break option in a lease, rent reviews, or exercising an option to acquire a freehold. The maintenance and monitoring of appropriate diary systems are important, but that will not remove the risk entirely. In the first instance fee earners need to recognise that a time limit applies and know what it is. They also need to record the time limit correctly and respond in a timely way, ensuring that they do not compromise the quality and completion of the required work by leaving matters too late.

The issues can be adequately summarised by reference to “the 4 Rs”:

• Recognise that time limits apply
• Research what the time limit is
• Record the time limit correctly
• Respond in a timely way.

7.

Lack of supervision/Failure to seek assistance

Lack of supervision and the failure of a supervisor to pick up errors and problems, or recognise when a junior solicitor is out of their depth, can lead to claims. It is important for firms to recognise that not all lawyers make good supervisors. It is useful to review supervision arrangements from time to time to ensure they remain appropriate. Supervisors also need to understand what is expected of them and training and guidance should be provided to them on the responsibilities of supervision.

Fee earners also need to be encouraged to seek help from their supervisor when they are uncertain and to speak up if they do not feel they are getting adequate supervision and support. While many firms claim they have an “open door policy” that enables all staff to raise concerns and issues, you might want to challenge whether this is the reality across your firm. If you have fee earners who are reluctant to approach their supervisor for assistance, or are regularly turned away to wait for “a better time”, then that presents an increased risk.

8.

Advising outside your area of expertise

This might seem a very basic point, and while it is rare for a fee earner to take on a matter that is entirely outside their area of expertise, we do see scenarios where they stray into peripheral areas beyond their expertise during the course of a retainer. Advising (or failing to advise) on tax issues is a good example of this.

Ensure that your fee earners are aware of this risk and have the confidence to be clear with a client when they need to instruct another professional, such as an accountant or tax advisor.

9.

Conflicts of interest

Recognising a conflict of interest can be a challenge. It is not always immediately obvious, can be finely balanced and will sometimes arise during the course of a retainer – for example an own interest conflict when you have made an error.

Failure to identify a conflict of interest can lead to complaints and claims that are time consuming, expensive and professionally embarrassing. Firms need to be certain that they have robust processes in place for conflicts checking and experienced practitioners to deal with any matters that need to be escalated for a decision.

This issue is not just the responsibility of those undertaking centralised conflicts checking in a firm. All fee earners must understand and be alert to conflict issues. It is an area where regular refresher training is useful. The Law Society Practice Note on conflicts of interest is helpful and could be used as a basis for discussion. It is available here. The SRA website also has a Guidance Note available here. While it is not as comprehensive as the Practice Note it might be a useful starting point and links to a case study that could be used for training.

10. 

Time pressure

Failure to manage workloads or an excessive amount of work can lead to poor service and mistakes. We encourage firms to manage workloads with regular one-to-one meetings with fee earners. For firms defending a professional negligence claim or disciplinary proceeding, there will be little sympathy for those who seek to excuse shortcomings by pleading time pressure.

All fee earners should be encouraged to say if the volume of work they have is compromising their ability to deliver services to the appropriate standard. Instructions from a client should not be accepted if there is a risk your firm cannot deliver to the required timeline.

It is also important to manage clients regarding timelines – advise them of the risk if they do not meet deadlines to provide information and instructions within the timeframe you give them. Do not let their procrastination become your emergency.