Proctor : March 2017
19 PROCTOR | March 2017 Practice changes (mergers, acquisitions, splits and dissolutions) We find that the end of the financial year is the most active time for practice changes including purchases, mergers, amalgamations, takeovers, transfers, splits of partnership, entity transitions (for example, firm to ILP), principals (or former principals) leaving or joining, dissolutions or the recommencement of a former practice. Given this, it is an opportune time to remind practitioners that, as part of their due diligence prior to undertaking such changes, they should consider the potential impact of the prior law practice (PLP) rule which seeks to maintain equity in the insurance scheme by ensuring a practice (and its relevant successor) retains responsibility for the insurance consequences of a claim made against it. There are potentially significant financial consequences (in terms of future insurance levies and payment of excesses) 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. Getting ready for the end of year March hot topic Lexon Insurance Pte Ltd ARBN 098 964 740 Incorporated in Singapore Registration No: 200104171C • Lexon is always ‘looking over the horizon’ for the next possible source of claims so that we can take steps to educate the profession and, hopefully, avoid the stress and cost of claims events. As part of that process we regularly meet with the profession to canvass emerging risk areas. We often do this via a ‘think-tank’ round table with key players; a recent example is the extensive engagement process in the lead-up to the Foreign Residents Capital Gains Withholding regime which went live on 1 July 2016. As a result of these discussions, a new LastCheck has been produced and risk alerts released. The LastCheck can be found on our website. If you are not receiving our risk alerts and would like to, please drop us a line. • Lexon prides itself on the extensive coverage it provides to the profession. This includes when a practice is undertaking ‘foreign law’ work provided that either: • a lawyer suitably qualified in the relevant jurisdiction is retained to assist in the matter, or • the law practice can establish ‘special reasons’ – for example, it can demonstrate sufficient local expertise in advising on such matters. If you are intending to undertake foreign law work, you should contact Lexon to discuss coverage. Did you know? Lexon Insurance Pte Ltd is a wholly owned subsidiary of Queensland Law Society.