September news

11 year high for court cases against negligent firms

It has been recently reported that the number of professional negligence claims launched against professional services firms in the high courts has hit an 11 year high. Subsequently this is increasingly forcing companies to borrow to pay rising professional indemnity insurance rates. With the current economic climate this couldn't have come at a more financially challenging time for companies across the UK.

Syscap, an independent finance provider reported claims to be at their highest since 1998. The number of High Court cases has jumped 125% to 332 in 2009, increasing from 147 cases in 2008.

During a tough economic climate, lenders and investors often seek to reclaim losses in the value of assets, such as property, by suing their advisors. Ultimately they aim to claim monies from advisors who they believe provided them with unsound or negligent advice.

To cover the cost of these claims firms who provide advice, such as accountants and lawyers, take out professional indemnity insurance. The dramatic rise in claims is pushing claims across the industry.

Philip White, CEO, of Syscap, stated: "A ‘perfect storm' is an overused expression but for law firms that is exactly what it is. Claims and premiums are rising. Whilst law firms could traditionally fund their annual purchase of PI insurance from cash or a bank overdraft the recession means they have little spare cash and the credit crunch means overdraft facilities are restricted."

The rise in the cost of premiums has led to a growing number of firms such as accountants and lawyers looking for competitive premiums. While it's natural to look for the cheapest option it's important to make sure this isn't at the expense of your insurance cover.