Changing of the guard - introducing Michael Blüthner Speight

At Howden we do more than just sell you professional indemnity insurance (PII). Thought leadership and risk management guidance are an important part of the service we provide for our law firm clients.

The material we have published in recent years has been delivered by Jenny Screech, but there is now a “changing of the guard” as Jenny retires. We take this opportunity to wish Jenny well and thank her for all the excellent work for Howden and her wider contribution in the world of solicitors’ PII.

We now welcome Michael Blüthner Speight as Jenny’s successor. We’re delighted to have Michael on board to continue leading this work and he brings a wealth of knowledge and experience to the role. To help our readers get to know Michael, we put some questions to him about his experience and views on issues relating to solicitors’ PII.  His insights will give you some things to think about.

What is the background and experience you bring to your new role with Howden?

Firstly, I want to say that I’m delighted to have joined Howden and I’m really looking forward to getting stuck into the role and focusing on the continued delivery of thought leadership material to assist and support law firms.

I started off as a solicitor in private practice nearly 21 years ago, latterly as a partner at BLM LLP. I specialised in defending PII claims against a range of professionals, but with a particular focus on solicitors’ PII. I moved into the insurance industry in 2012 after having undertaken several secondments with insurer clients. I worked for the SRA Assigned Risks Pool (ARP) for two years, before joining Zurich as the Risk Manager for Financial Lines in 2014. I was later promoted to Legal Professions Manager, being responsible for underwriting Zurich’s legal professions portfolio of business. In 2020 I joined Travelers where I had roles in claims and claim relationship management, before joining Howden at the beginning of this month. So, I have held roles in private practice, claims, risk management and underwriting during my career to date, which covers most bases!

With such a broad experience you must have seen a huge range of PII claims and challenges faced by law firms over the years?

I would say so. Having worked in various roles for two insurers who have been around since the start of the open market in 2000, as well as the insurer of last resort before the ARP closed down in 2013, I believe I have seen both the best and the very worst of the legal profession over the years. With the odd notable exception, I would like to think that there is little that might come across my desk that would shock me nowadays!

Are there any particular trends that you have seen over the time that you have been working in the world of solicitors’ PII?

In my opinion, law firms are much better at running a business and complying with relevant regulations and their own internal compliance procedures nowadays. This is in part because the regulatory landscape has developed significantly in recent years, with an ever-increasing focus on compliance and regulators taking increasingly draconian action against those who fall foul of their requirements. By way of example, when I first started defending claims against law firms, I would regularly be presented with an incomplete or even non-existent file. As you will appreciate that made mounting a robust defence very difficult, if not impossible, on occasion! File management and record keeping is much better these days.

I also believe that law firms are better at engaging with their brokers and insurers when it comes to notifying circumstances and claims. Whilst this is in part due to necessity – as an uncooperative insured is unlikely to present an attractive risk to an insurer – firms now have a better understanding of the importance of having a good working relationship with their broker and insurer. Both can provide a wealth of experience, advice and assistance to law firms.

It is also worth noting that areas of practice that are typically heavily commoditised, such as personal injury and conveyancing, are so much better managed nowadays. Of course, there have been significant advances in technology and case management software to help with this, but there is also more comprehensive training and supervision of fee earners undertaking the work within firms. This is reflected in the claims data; when I first qualified as a solicitor and started acting for law firms, over 50% of claims against law firms related to conveyancing, but Howden’s latest data shows that this has dropped to approximately 37% for the current indemnity year. Whilst this is still the area of practice with the highest percentage of notifications overall, it is a significant and encouraging downward trend over the years.

With the move away from the recent hard market, insurer appetite for new business has generally increased. That said, several insurers’ attitudes towards high-risk areas of practice such as personal injury and, in particular, conveyancing remain limited. However, there are plenty of firms out there who undertake a lot of conveyancing and do it well and have excellent claims records. As such, I was very pleased to learn that Howden’s new exclusive facility has no limit on the level of conveyancing a firm undertakes and instead focuses on firms that have a good claims history and sound approach to risk management. This is excellent news for firms with this sort of profile. 

What do you consider to be the most pressing issues for law firms at the moment?

I could answer that by saying “everything”, as there are so many challenges facing law firms currently, be it from an economic, political, regulatory, recruitment or other perspective. However, I’ll keep the discussion to three that are of particular interest to me.

Firstly, I think the issue of mental health and wellbeing in law firms should be taken very seriously. It is an area of particular focus currently, with the SRA issuing fairly comprehensive updated guidance on this topic last year. It directly affects and concerns every member of staff at a firm. A fee earner who is anxious, tired or stressed will not perform to their best and is much more likely to make a mistake.

There is also a clear link between mental health and wellbeing and a firm’s claims activity. Some insurers have started to examine their own claims data to see if the underlying cause of a claim can be linked to a mental health or wellbeing issue and, if so, they are now asking what measures a firm has put in place to address any issues identified and prevent recurrence.

The next issue on my list is the uncertain financial landscape. This is something which needs to be closely monitored. Historic claims data demonstrates that an economic downturn leads to an uptick in claims against law firms. To date, 2024 has seen an increase in insolvencies and bankruptcies against last year and, whilst the property market remains fairly stable at present, interest rates remain high which is a challenge for some homeowners.

If house prices were to fall, this could lead to an increase in conveyancing claims, particularly if lenders suffer a loss following repossessions. This should not be anywhere near as bad as the wave of lender claims experienced after the global financial crisis of 2008, as lending practices improved dramatically in the intervening years thanks to a significant increase in scrutiny and regulation of the banks by the FCA and PRA, but this is something which should be kept under close review over the coming months.

The third issue I consider to be particularly important for law firms currently is cyber risk. In the last few years there has been an increasing number of notifications against PII policies arising from cyber-related issues. It also concerns me that there are still too many firms out there without a standalone cyber insurance policy.

If a law firm suffers a cyber incident, this can (and often does) lead to significant disruption to their business. A solicitors’ PII policy only responds to third party loss and will not cover costs and expenses of dealing with a cyber event. This can include reporting to the ICO and communicating with affected clients, engaging specialists to provide support, assistance and remediate systems, and other losses relating to the interruption to your business, which can be very significant.  I strongly recommend firms consider purchasing a standalone cyber policy if possible. Not doing so is likely to be a false economy.  

I recently experienced the consequences of a firm being subject to a cyber incident without the benefit of cyber insurance first hand. A family member called me complaining that he could not get hold of his solicitor to see how a matter they were dealing with for him was progressing – one of the perils of being the lawyer in the family! It prompted me to visit the firm’s website, where I saw a notice on the homepage stating that the firm had been victim of a catastrophic cyber incident, which ended up putting their IT systems out of action for over 8 weeks.

The firm in question does not currently have a standalone cyber insurance policy (I suspect this will shortly change!). This is no doubt why it took so long for their systems to be up and running again, and I dread to think how much this incident has ended up costing the firm. It will also no doubt have led to complaints and potential claims against the firm from affected clients as a result, which will likely have an adverse effect on its solicitors’ PII claims history too.

And do you have any predictions for what you consider to be likely trends for solicitors’ claims over the next, say, 5 years?

I’ll start by saying “more of the same.” By that, I mean the perennial favourites – conveyancing and personal injury claims – are likely to remain predominant. I also expect a further increase in wills, trust and probate claims too. This trend is already showing in the claims data and firms need to be aware that underwriters are watching this closely.

There is currently some discussion about the potential for the Building Safety Act (BSA) to lead to more claims against solicitors, although we are not currently seeing this come through in the data. There is also a good level of awareness within law firms regarding the challenges of work relating to the BSA and hopefully we are ahead of the curve on this issue with firms putting the right processes in place from the start.

It will be interesting to see what impact the increasing adoption of AI in law firms will have on claims trends, but I expect it to have some effect and there is a risk of an increase in claims if firms do not adopt robust risk management strategies alongside AI developments.

Regrettably we should expect that more “claims farming” will likely rear its head at some point, where one or more law firms actively search for claimants to bring claims against others in the profession. There has been a steady flow of these over the years, with varying degrees of success. Examples include claims for under-settlement of VWF claims and ancillary relief claims in divorce proceedings, failure to advise about multiple dwellings relief (MDR), onerous ground rents etc. Alleged shortcomings in advice on equity release could be a candidate, particularly given the growth in this activity in recent years,

Ultimately, clients will always look to blame their legal advisers where they have suffered a loss or an outcome that they are not happy with, regardless of whether or not the firm is actually at fault. Underwriters expect to see notifications of claims and circumstances from firms – it’s an occupational hazard; but firms need to maintain a keen focus on risk management to minimise the potential for claims.