Top 5 trends most likely to affect solicitors' claims in 2024
As a law firm, you will want to be ahead of the curve when it comes to your claims risk management, so you may be interested to know what we consider will be the top 5 claims trends in 2024.
Employee health & wellbeing
The importance and awareness of employee health and wellbeing has accelerated in recent years – and quite rightly so. It is really encouraging to see so many law firms engaging with initiatives to nurture and promote positive work cultures, given that we regularly observe a link between health and wellbeing and claims activity. It’s easy to put most claims down to mistakes like a missed deadline or an incomplete document, but if you look past the error/omission and toward the true causation, you might just find someone who is struggling to cope and needs help. By failing to identify the root cause of that mistake you can create a breeding ground for more mistakes, and therefore more claims.
Whilst Covid and, more specifically, “Lockdown” may now feel like a strange, distant memory, one big part of the Covid working life remains – WFH. Some feel that working from home is the single most positive change to their working life since starting their career, whereas others would argue that everyone should be back in the office 5 days a week. Controversial stuff. Regardless of where you stand, it is the case that most firms currently adopt a hybrid working policy and we think that this will produce claims in 2024. It is incontrovertible that hybrid working allows for a better work/life balance, however working from home can massively reduce employee supervision, making it easier for mistakes go unnoticed. It also makes it much harder for you to spot the signs if someone is struggling – you can often go weeks without seeing one of your colleagues and because of this you would never really know if something was wrong.
As we move into 2024, economic uncertainty looks set to continue throughout the year and we anticipate that this will be an underlying catalyst for claims against law firms. The growingly bleak economic landscape will inevitably drive people and businesses into unforeseen financial difficulty and we expect many will be trying to undo agreements they are tied into and can no longer afford, whether that be leases, mortgages or commercial deals. If that cannot be achieved, another viable option might be to allege shortcomings in the advice or service received from their legal representative to improve their financial position. Claims by disappointed beneficiaries who don’t get what they expected under a Will have also been more frequent in recent times, and we expect these claims to continue to rise throughout 2024.
We understand there has also been a rise in contractual disputes, insolvency and bankruptcy filings which are prompting both individuals and businesses to seek legal advice and representation. We also anticipate a general increase in employment claims as businesses are forced to downsize and restructure as a consequence of increasing financial constraints. This activity may produce an influx in demand for legal services where lawyers will be expected to navigate these particularly choppy waters. As such, law firms should proceed with caution to ensure that they don’t make themselves the safety net for a claim if a client does not achieve the desired result.
Throughout 2023 we saw a large volume of cyber attacks/data breaches and with the fast-evolving technological capabilities and sophistication of cyber criminals, we predict that this will increase in 2024 and cause an increase in cyber-related claims against law firms. As a lawyer, you cannot avoid receiving and handling sensitive information, such as client data and confidential legal documents, which places a big target on your back. The consequences of a cyber attack or data breach can be catastrophic for both you and your clients. If a client suffers a financial or reputational loss, or is exposed to legal action being taken against them as a consequence of a data breach at a firm, they will look to claim for damages to the full extent of any loss suffered. While some of these attacks are unavoidable, the training and education of staff will hugely reduce the risk of falling victim to a cyber-attack. Cyber criminals and fraudsters know exactly where and when to strike, often relying on oversight and laziness, which are both avoidable under a proper training regime. Avoidance is of course preferable, but it is equally important that employees know exactly what they must do if they think they have been the subject of a cyber-attack or a data breach, as timing will invariably be of the essence.
AI and employees struggling to cope with digitalisation
It would be difficult not to mention AI when talking about… well, anything really, but in this case, the trends that we think will lead to claims in the coming year. AI has been a hot topic for a few years now and with some of the recent developments that we have seen, it seems to only be a matter of time before more and more firms begin to implement the technology, even if only at a very basic level. It was recently reported that an AI-powered paralegal managed to pass part one of the Solicitors Qualifying Exam with a score of 74% (beating the typical pass rate of between 55% and 65%), which is an indication that the technology could already be capable of working at the same capacity as the average paralegal.
There are various ways that the use of AI could give rise to claims against law firms and we expect these will evolve as the use of AI increases. By way of example, if you are relying on AI to complete tasks such as basic file reviews or finding information within large volumes of documents, there is a risk that the robot makes a mistake. Without human supervision, that error could go unnoticed and be made again, potentially leading to multiple claims.
We also expect firms to see claims arising as a result of staff struggling to cope with the increase in digitalisation and the implementation of new systems. When your procurement team are looking at investing in new software for business systems, favourable consideration will be given to how it will improve productivity and reduce costs, which is understandable. You may not see as much attention given to staff being able to cope with the new systems, not least if you are looking at an over-night system migration. Staff will be used to doing things a certain way, perhaps having done things that way for most of their career, and those that are struggling to adjust are more likely to make mistakes.
Building Safety Act 2022
The new Building Safety Act and related Regulations are still quite raw and we have not seen many, if any, claims to date with regard to the new requirements. However, this is a difficult area and we do expect to see some claims start to come out of the woodwork in the coming year.
The introduction of this Act has raised significant concern for conveyancers when it comes to their obligations under the Act moving forward. For example, a seller and their solicitor simply cannot verify a buyers’ claim that the relevant property qualifies for leasehold protection under the Act because they cannot check how many properties the leaseholder on 14th February 2022 held. The requirement for solicitors to understand and be able to explain the complex implications of the Act is also an area of concern as many solicitors will not have the required level of knowledge. Firms need to take great care with this work and ensure that they have the relevant expertise before accepting instructions where the BSA will be relevant.
Conclusion and the SRA
To wrap up our Top 5 predicted claims trends, we want to let you have our thoughts on the SRA-related issues we feel may trigger claims against law firms in 2024. Whilst all of the above areas are likely to cause claims, it is also important that you consider what the SRA are taking interest in. For example, the SRA are clamping down on Anti-Money Laundering compliance after finding that only 1 in 3 firms were fully compliant in a recent report. Other areas we think the SRA may take interest in are cyber security, a firm’s financial controls and stability following on from the recent intervention of Axiom Ince and ESG-related issues. It is also understood that the SRA are looking at increasing their fining powers, which in matters of severe misconduct could be unlimited. Risk management in law firms has never been more important.
Claims Handler - Legal, Technical & Claims