Legal practices

In this chapter of our Annual Insurance Review 2022, we look at the main developments in 2021 and expected issues in 2022 for legal practices.

Key developments in 2021

The Supreme Court's decision in Manchester Building Society v Grant Thorton was the key development for those who deal with claims against solicitors in 2021. 

The decision represents a move away from the long-established "information / advice case" test in SAAMCo for assessing the extent to which a claimant's loss falls within the scope of a solicitor's duty of care. This 1997 House of Lords case has been enormously important to insurers of law firms and has saved hundreds of millions of pounds in indemnity payments over the last 24 years. Where a solicitor only provided "information" their liability was limited to those losses which were a direct consequence of the information being wrong and not all of the loss occasioned by the claimant entering into the transaction in reliance on the incorrect advice. 

The Supreme Court has now moved away from that distinction. Courts are now required to consider the purpose for which a solicitor's advice was sought and the risks which the advice was intended to guard against. A loss will be found to fall within the scope of a solicitor's duty if it is the result of one of those risks materialising. 

There is a debate as to whether the decision has changed anything – the Supreme Court was not purporting to change the law. However, the re-defining of the relevant tests has surprised a number of lawyers and will give rise to a period of uncertainty while new decisions emerge from the courts applying the new guidance.  

What to look out for in 2022

2021 saw an increased use in technology across the legal sector and that trend is likely to continue into 2022. There is a move away from traditional 'face-to-face' meetings as clients now expect to be offered the possibility of video conferences instead. Video conferences offer a great deal of flexibility and save the time and costs previously incurred when travelling to and from meetings in-person.

The disruption to office / home / hybrid approaches looks likely to continue well into 2022 and the new technology has come with fresh challenges and risks. A particular challenge will continue to be the supervision of teams and communication with junior lawyers. Break downs in communication can lead to confusion over who in a team is doing what with the risk that work is not done or deadlines are missed. 

Similarly, cyber-attacks will continue to be a major concern with vast amounts of sensitive information held on law firm computers and the risk that employees working remotely could fall foul of phishing and other scams. There is also the ongoing concern of claims arising in the event of a cyber breach if solicitors are unable to access the information required to allow them to serve their clients.

Written by Cheryl Laird.

Download our full Annual Insurance Review 2022 for more insights.