Law firms are increasing their professional indemnity insurance cover as well as limiting liability contractually, indicating an ever-heightened awareness of risk.
Nearly half (49 per cent) of the firms in the UK’s top 100 bought between £50m and £100m worth of cover in 2005, in contrast with only 36 per cent in 2004.
The number of law firms buying cover worth between £150m and £200m also rose, from 8.3 per cent to 15 per cent.
The news comes from a survey of the UK’s largest law firms carried out by professional indemnity boutique Legal Risk.
It found that more than 90 per cent of firms sometimes or always limit liability through contracts, in addition to the 40 per cent of respondents that have already converted to limited-liability partnership (LLP) status.
Risk management in law firms is now more often the responsibility of a risk management specialist. Almost a third (29.3 per cent) of firms have appointed a dedicated full-time risk manager. Partner committees deal with risk management at a quarter of the firms surveyed.
Firms are also responding to the risks incurred by picking up liabilities through mergers, a common cause of professional negligence actions against solicitors. A massive 78 per cent of respondent firms said they now check for successor practice liability when carrying out lateral hires and mergers, a rise of 24 per cent from 2004.