Member Article

Claims culture is a "ticking timebomb"

The combination of the UK’s increasingly litigious society and the fierce pressure many professionals are under is a ticking timebomb, according to a leading Yorkshire lawyer.

Mike Willis, a former partner with Leeds-based DAC Beachcroft who now runs his own firm F Mike Willis, believes that too many professionals, such as accountants and solicitors, are facing claims which could have damaging consequences.

“These claims are time-consuming and worrying. They can range from internal disputes, insurance issues, regulatory issues and client problems. They can be complex and potentially disastrous. They often arrive on top of an already overflowing in-tray,” explained Mr Willis, whose firm celebrates its first anniversary this month.

He added: “But it is crucial not to ignore them. They don’t just go away. Their increasing frequency across all the professions adds up to a ticking timebomb, which has to be addressed pro-actively before it causes havoc.”

The most common claims-related problems facing professionals are:

• Should I sue on a bad debt – or am I vulnerable to disproportionate retaliation?

• How do I tell insurers of my peril in a way that transfers the risk without scaring them to an extent that endangers next year’s renewal, or at least inflates the insurance premium?

• Do insurers have to be told, and how should I treat with them once they have been told – especially if I’m uneasy about what they’re doing, or the terms of my cover?

• What action or measures can/must be taken meanwhile?

• How do I deal with an exposure that is not insured/able?

• What are the commercial priorities of the business and do these conflict with others?

• How do I manage our conflicts of interest?

• What and how do I tell our professional regulator?

• What and how do I tell partners, investors, bank, staff or other stakeholders?

“All these questions can seem very daunting,” said Mr Willis. “Getting to the bottom of the problem nearly always means a great deal of forensic research as well as planning routes ahead, often involving directors, staff, insurers and clients. Inevitably, these tasks are best carried out by an independent and experienced consultant, normally a professional risks’ lawyer, with a fresh, objective perspective. The aim is simple – to curb monetary losses and to limit brand or reputational damage.”

Causes of claims fall broadly into five categories: Bad management; technical error; bad luck; relationship breakdown; and dishonesty. Administrative inefficiencies are traditionally the most frequent causes of trouble. There is no limit to the range of potential scenarios attributable to file disorganisation, lax supervision, clerical errors and diary oversights. With luck, they are quickly mendable once discovered; but without it, they give rise to consequential claims or regulatory exposures.

This was posted in Bdaily's Members' News section by Robert Beaumont .