Proctor : September 2017
26 PROCTOR | September 2017 Our partnership with the profession has continued to drive down claims and we can now report that the 2016/17 year recorded 284 insurance files as at 30 June, the lowest number since our inception in 2001. This is an outstanding result for the scheme and combined with a stronger investment performance, has reinforced the decision made by Queensland Law Society in April 2017 to reduce 2017/18 base levy rates by 20%. 1 Claims profile Conveyancing drove overall claims values for 2016/17 and at 30 June represented 26% of the total. Whilst it is still early days in the development of the 2016/17 year, conveyancing costs are currently at a similar level to the preceding two years. Pleasingly, the trend toward lower conveyancing file numbers continues with only 22.5% of total files within this category (cf. early years of the program where this was around one third of all files). Commercial claims appear to have abated somewhat and at 30 June were 30% lower by value compared to 2015/16 and at the lowest levels since 2008/09. Also impressive is that file numbers at 30 June had dropped 34% year on year. Offsetting the above was a strong increase in litigation with claims values over $1.2m higher at 30 June than for the 2015/16 year. As file numbers in this area have decreased, the driver is the size of the claims rather than the number. The graphic below compares the portfolio breakdown by area of work for 2016/17 with ‘all years’. Overall claims values have reduced in more recent years and claims containment remains our primary goal. The profession’s commitment to risk management delivered an excellent claims year for Lexon in 2016/17. End of financial year review Lexon Insurance Pte Ltd ARBN 098 964 740 Incorporated in Singapore Registration No: 200104171C Policy enhancements in 2017/18 For 2017/18 we further simplified the policy wording and included some important enhancements discussed below: • The foreign law exclusion in the policy has been refined to permit practices to be covered for ‘pre-approved’ foreign law work. This constitutes an expansion of cover compared to the 2016/17 wording. As business becomes more international, Lexon recognises that retainers from time to time will touch upon matters involving foreign law. The policy response seeks to strike a balance by providing coverage to practices that can demonstrate sufficient experience and skill in these specialised areas, whilst at the same time protecting the insured cohort as a whole from the cost of claims that arise when practices become involved in foreign law matters outside of their competence. If you would like to seek pre-approval, please complete the application form available on our website. • LSC coverage has been expanded to ensure that, to the maximum extent possible, it follows on from the six hours of free legal advice provided by QLS (that is, the vast bulk of Lexon’s general exclusions will not apply to this aspect of cover). The changes to the insurance coverage are further explained in the document entitled ‘Outline of Changes to Master Policy No. QLS 2017 and the 2017-2018 Certificate of Insurance’, which can be found on our website. I am always interested in receiving your thoughts, so if you have any issues or concerns, please feel free to drop me a line at michael. firstname.lastname@example.org. Michael Young CEO 1 QLS president Christine Smyth announced on 28 April 2017 that base levy rates for 2017/18 would be reduced by 20% for each of bands 2 through 9. Claims cost by area of law 2016/17 2002/03-2016/17 21.69% 26.16% 12.00% 21.75% 6.45% 7.36% 0.00% 1.64% 2.96% 29.25% 36.63% 14.37% 6.24% 4.69% 4.37% 2.17% 0.17% 2.07% 0% 10% 20% 30% 40% Commercial Conveyancing Personal Injuries Litigation Family Law Wills & Estates Tax LSC Other It remains a live issue that practitioners are being asked by financiers to provide certifications or warranties regarding the subject matter of (usually) property or commercial transactions. Many of the requested certifications go beyond what a practitioner could say from within his or her own knowledge, for example, certifying that a trust was validly established when that is not within the practitioner’s knowledge or providing an absolute statement that contracts are binding and enforceable. The profession is being increasingly asked to certify matters that are inappropriate and beyond their knowledge, frequently in terms that have no qualifications. Practitioners should be vigilant to only certify matters that are within their own knowledge, retain evidence of the basis for so certifying, and caveat the certification appropriately. Whilst this is always good practice, from an insurance perspective failing to do so could potentially activate exclusions within the policy, which would be an undesirable outcome. The Third Party Certificate LastCheck available at our website identifies a number of key concepts to manage. Off-the-plan contracts Whilst the number of conveyancing claims have diminished in recent times, should another property crash occur we would expect to see disgruntled purchasers seeking to exit property deals. This risk is magnified for practitioners acting for sellers in the case of ‘off-the-plan’ contracts, which will often have long settlement times and may be the subject of replicated errors. Following the GFC these replicated errors resulted in several multi- million-dollar claims impacting practices throughout the state. In late 2013 Lexon rolled out a further free in-practice workshop program to target this specific risk area. Project Stress Test (as it is known) targets sellers’ transactional property work and involves the review of sample contracts followed by a practical ‘hands-on’ roundtable 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. Please contact Robert Mackay at email@example.com if you are interested in being involved. Solicitors’ certificates September hot topics Lexon Insurance Pte Ltd ARBN 098 964 740 Incorporated in Singapore Registration No: 200104171C • For the 2017/18 insurance year QLS Council arranged with Lexon to again make top-up insurance available to QLS members who sought the additional comfort of professional indemnity cover beyond the existing $2 million per claim provided to all insured practitioners. Practitioners had the choice of increasing cover under the Lexon policy to either $5 million or $10 million per claim. There has been significant interest in Lexon’s offering with over 150 practices signing up in this, the second year. This was beyond our expectations and realised a goal of making affordable top-up cover available to all practices in Queensland. • We remind practitioners acting as directors or officers of ‘outside’ companies (or any other body corporate) that the Lexon policy only responds to claims arising from the provision of legal services. Practitioners who assume those roles may wish to seek appropriate advice as to whether they have, or require, directors’ and officers’ insurance. • Lexon has entered into a consultancy agreement with a Bar association in the Asia Pacific region to replicate our program across their jurisdiction. This is further recognition of Lexon’s class- leading work in claim reduction and our growing regional profile. Did you know? Lexon Insurance Pte Ltd is a wholly owned subsidiary of Queensland Law Society.