PI claims rise in working from home environment

Law firms are experiencing a rise in professional indemnity claims (PI) during the pandemic which needs to be addressed to avoid conflicts and legal disputes with clients as well as higher insurance premium at renewal.

As working from home becomes something of a staple for employment, the convenience of home working can impact the accessibility of colleagues and consequently, the ability to properly supervise and review.

In data shared by a leading insurance firm, professional indemnity claims stemming from dispute resolution accounted for25% of errors between March 2020 and September 2021, up from 16% for the 18-month period leading up to March 2020. The insurer noted that inappropriate action and missed time limits saw particular increases.

The period also saw a wide range of advice failures making up a large part of alleged acts during the pandemic, while dishonesty related to cyber incidents, was another driver during the height of the pandemic.

Claims drivers

Disrupted communications between teams can impact the usual checks and balances followed in the office. The concern is that as communication becomes more cumbersome, the usual standards of peer reviews become difficult. This in-turn may affect accountability, with missed deadlines one result of extended periods of working from home.

Other consequences of the working from home model could be that with the ability to simply turn and speak to a colleague for advice, the likelihood of mistakes or inaccurate advice increases, as the osmosis effect of the office is cut off.

According to The Lawyer, a survey answered by 132 law firms (opens a new window) showed that the majority of firms have adopted a non-descript approach to working from home, with one firm only asking that employees come into the office for at least 50% of the calendar year. The second-highest answer from law firms was that no formal policy had been introduced to working from home, with some firms leaving it to a team-by-team decision.

Why is it concerning?

If the rise in PI claims is being driven, at least in part, by the adoption of work from home models, the short-term rise in complaints against law firms may also have longer-term impacts.

The long-term threat associated with matters like inaccurate advice is that it could take a number of years for the fallout of legal advice to show itself. It means that while working from home offers a more flexible model for employees, it may carry the threat of long-term risk exposure to firms, in a market that has already hardened in recent years.

What do firms need to do?

Working from home is likely a mainstay for employers now, and with PI claims posing a long-term concern, the onus is on law firms to ensure they evolve alongside this threat.

When considering how to effectively react to this “new normal” of working, law firms should consider the following for their employees when working from home:

Supervision and peer reviews

Ensuring that workflow is properly peer reviewed before consulting clients is an obstacle when working from home, but firms should ensure that processes are in place and being followed.

Employing technology is the easiest route to put in place processes to reviewing work. Applications like Microsoft Teams, Trello, and Asana all offer workflow planners, which allow you to organise projects and assign team members. Effectively using these tools will mean teams are able to ensure work is reviewed in advance, allowing for changes and edits to projects being made before going to clients with potentially harmful advice.

Communication

Working from home can fracture teams in many ways, however, simple moves can allow for a smoother transition from in-office working to working from home.

Making sure team members have forwarded calls from their office phones to mobile phones will make it easier to contact one another to discuss projects with clients, which may help in addressing the rise in missed deadline complaints.

Internal discussions can also be helped with video and audio calls between team members. Microsoft Teams and Zoom have become common tools as working from home became more common during the pandemic. These application make group calls and one-to-one calls far easier between team members, meaning advice for consultations can be discussed prior to clients being advised.

Ongoing CPD

Continued professional development (CPD) is an essential tool in maintaining best practice across a variety of professional and ethical aspects within the legal field. However, during the pandemic, the role CPD played was severely reduced. In an interview with Legal Futures (opens a new window), managing director of Ridley & Hall Solicitors Emma Pearmaine said that as employees were furloughed or began adjusting to working from home “CPD was not on the list of urgent things for the first few months.”

Ensuring effective CPD is readily available for employees working from home provides resources that could help avoid mistakes or ethical issues arising further down the line. CPD could take a more formal approach such a lectures or online courses, while sessions between teams on a weekly or monthly basis also allows opportunities for employees to raise any uncertainties.

If law firms are committing to a hybrid model of in office and working from home, then measures must be in place to translate the accountability, communication, and organisation from the office, to the home.

Effective communication and accountability will provide a solid foundation for employees and potentially limit issues with missed deadlines and inaccurate advice, possibly safeguarding law firms for the long-term use of working from home.

If you would like to discuss professional indemnity risks and what options are available to you, get in touch with our team:

Melody Qian SVP, Global Professional and Financial Risks - Greater China

+852 2250 2672   melody.qian@lockton.com

Kevin Wong VP, Global Professional and Financial Risks - Greater China

+852 2250 2886  kevin.wong@lockton.com