Proctor : July 2015
Why do we have a prior law practice (PLP) rule? July hot topic Lexon Insurance Pte Ltd ARBN 098 964 740 Incorporated in Singapore Registration No: 200104171C • As a consequence of Lexon’s successful management of the insurance scheme, QLS Council resolved earlier this year to extend our mandate as the Queensland profession’s professional indemnity insurer for a further five years until 30 June 2021. Absent any decision to the contrary, this mandate will automatically renew for successive five-year periods from that date. This decision allows Lexon to effectively plan for the longer term and reinforces the commitment of QLS to provide the profession with a class-leading professional indemnity insurance product. • In late 2013 Lexon rolled out a further free workshop program to target specific risk areas. Project Stress Test (as it is known) was initially trialled for transactional property work and involves the review of sample contracts followed by a practical “hands on” round table discussion with authors working in relevant areas. The program seeks to highlight the top possible failure points and allows Lexon to play devil’s advocate to help practices identify and manage any gaps. This initiative represents another partnership Lexon has formed with the profession and it has been extremely well received. Indeed, the initial feedback has been such that we have now expanded the program to include family law issues relating to Binding Financial Agreements. Please contact Robert Mackay at email@example.com if you are interested in being involved. Did you know? Lexon Insurance Pte Ltd is a wholly owned subsidiary of Queensland Law Society. The levy model caters for changes which occur to practices over time through the concepts of the prior law practice and the successor law practice. The primary purpose of these concepts, which are similar to those used in many solicitors’ indemnity insurance schemes (including other states of Australia and in several common law jurisdictions), is to: • Ensure continuity of coverage for practices (including staff) for past legal services performed regardless of developments at the practice; and • Encourage appropriate risk management as part of succession planning. At the same time, the PLP concept seeks to maintain equity in the insurance scheme by ensuring a practice (and its relevant successor) retains responsibility for the levy consequences of a claim against it. The PLP concept can have application in many scenarios including the purchase of a practice, merger, amalgamation, takeover, transfer, split of partnership, entity transition (for example, firm to ILP), principals (or former principals) leaving or joining, dissolution of a practice or the recommencement of a former practice. There are potentially significant financial consequences which should be borne in mind when considering such changes. Because of these consequences, law practices are strongly encouraged to: • Be familiar with the policy wording and Indemnity Rule (including Rule 10(6)) and the implications they may have; • Contact Lexon to discuss your particular circumstances; • Take independent legal advice where required; • Consider contractual terms for adjustments/indemnities to provide some recourse in the future; • Obtain a written authority and direction for Lexon to disclose the claims history and insurance history of any practice which you may be acquiring etc. Note – this will only reveal existing matters. Lexon offers law practices what is known as an Acquisition Endorsement which enables a practice acquiring another practice to limit the impact of new claims that arise out of closed matters previously handled by the acquired practice. The Acquisition Endorsement provides the following benefits: • Such claims are excluded from any future claims loading calculations; • The applicable excess for such claims will be that of the acquired practice (which will often be lower than would otherwise be the case); • No deterrent excess will apply irrespective of the circumstances. Further information on the PLP concept and the Acquisition Endorsement can be found in detailed information sheets available on the Lexon website.