Proctor : March 2019
23 PROCTOR | March 2019 Practice changes (mergers, acquisitions, splits and dissolutions) We find that the end of the financial year is the most active time for practice changes. These may include 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 when 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 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. More 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 • QLS Council has again arranged with Lexon to make top-up insurance available to QLS members who would like the additional comfort of professional indemnity cover beyond the existing $2 million per claim provided to all insured practitioners. This option is available at very competitive rates and practitioners have the choice of increasing cover under the Lexon policy to either $5 million or $10 million per claim. This offering comes with the full backing of Lexon and ensures access to its class-leading claims and risk teams in the event that you require their assistance. More details will be provided during the renewals process. • The Foreign Law exclusion in the policy has been refined to permit practices to be covered for ‘pre-approved’ foreign law work. 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, lexoninsurance.com.au. Did you know? Lexon Insurance Pte Ltd is a wholly owned subsidiary of Queensland Law Society.